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UK economy avoids recession but growth slumps to worst in a decade

Tom Belger
·Finance and policy reporter
A hot air balloon flies over the London skyline during the 2019 Lord Mayor's Hot Air Balloon Regatta early Sunday June 9, 2019. (David Mirzoeff/PA via AP)
New figures showed how the UK economy is faring. Photo: David Mirzoeff/PA via AP

The UK economy has avoided falling into recession in the third quarter, but official figures show annual growth has dropped to its lowest pace in almost a decade.

New estimates from the Office for National Statistics (ONS) show British GDP rose 0.3% in Q3 from July to September.

Chancellor Sajid Javid welcomed “solid” growth, but business leaders warned it was “nothing to celebrate” and highlighted the disruption for firms caused by two missed Brexit deadlines this year.

The British economy had unexpectedly shrunk in the previous quarter to June by 0.2%, with manufacturers suffering as a global slowdown and Brexit uncertainty hit investment and orders.

That marked the first quarterly decline since 2012, sparking fears of a technical recession – two consecutive quarters of decline.

READ MORE: Chinese firm in talks over ‘£70m deal’ for British Steel

The avoidance of a recession will come as a relief to UK prime minister Boris Johnson, who took office in July, as Britain gears up for a general election in December.

The ONS said the services and construction industries, UK consumer spending, and government spending had boosted growth.

But manufacturing failed to grow and the quarterly figure of 0.3% came in lower than expected by the Bank of England and a Reuters poll of economists, who had forecast 0.4% growth. The National Institute of Economic and Social Research had expected even higher growth at 0.5%.

The figures still show third-quarter growth is up just 1% on a year earlier, the slowest rate of annual growth since the first quarter of 2010.

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Tej Parikh, chief economist of the Institute of Directors, said: “A return to growth is welcome news, but narrowly avoiding a recession is nothing to celebrate.

“The UK economy has been in stop-start mode all year, with growth punctuated by the various Brexit deadlines.

“Indeed, the pick-up in the third quarter numbers may slightly exaggerate the strength in the economy, with some activity likely to have been brought forward before 31 October. The final quarter of 2019 could be weaker as stockpiles continue to be run down.”

It comes after the credit rating giant Moody’s delivered a blow to the UK economy and potential borrowing costs for the next government on Friday night.

Moody’s downgraded Britain’s outlook from “stable” to “negative”, meaning the UK is at risk of a downgrade.

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The agency said the outlook downgrade was driven by the huge recent spending pledges of both main political parties ahead of the election.

It also said the politics of Brexit had diminished “the capability and predictability that has traditionally distinguished the UK’s institutional framework.”

But UK chancellor and Conservative politician Sajid Javid tweeted: “Great to see solid Q3 growth - another welcome sign fundamentals of UK economy are strong. Biggest risk to our economy is Corbyn’s Labour – its plans for *two* referendums in 2020 and out of control debt.”