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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Chancellor Rachel Reeves faces a monumental challenge in revitalizing the economy, as growth stagnated in the third quarter and business organizations anticipate a difficult beginning to 2025.
Mel Stride, the shadow chancellor, expressed concern as the Office for National Statistics reported no growth in GDP during the three months leading up to September, a decline from the initial 0.1% expansion estimate.
This lack of growth was primarily attributed to stagnant output in the services sector following the Labour party’s election victory in July, with a 0.4% decrease in production output offset by a 0.7% increase in the construction sector.
Business groups are predicting continued poor growth into the new year, with Reeves acknowledging the immense challenge ahead in repairing the economy and adequately funding public finances after years of neglect.
The CBI released survey results indicating that a majority of private sector firms anticipate a decrease in activity in the first quarter of the year, relying on government intervention to boost confidence and stimulate investment.
The British Retail Consortium highlighted a significant drop in consumer spending intentions, presenting a challenging year for retailers facing low demand and new costs from the Budget impacting the industry.
If growth falls short of Budget forecasts, there may be a need for spending cuts or higher taxes in the coming year to uphold borrowing rules.
Paul Johnson of the Institute for Fiscal Studies warned of potential financial challenges for the chancellor, emphasizing the importance of fiscal responsibility.
The government’s focus on economic growth is now at risk as the possibility of a contraction in the final quarter of the year looms.
Stride criticized Reeves’ Budget decisions and urged prompt action to prevent further damage to business confidence and economic stability.
Recent data indicates a decline in GDP and living standards, with household income stagnating and real GDP per capita falling.
Economic indicators suggest a slowdown in the jobs market, rising inflation, and diminishing business confidence, prompting the Bank of England to revise its growth forecast downward.
Economists point to positive trends in consumer spending and business investment, but overall growth has stalled due to external factors such as global demand and concerns over budget policies.
Despite some bright spots, the economy is facing challenges that require strategic planning and effective measures to stimulate growth and restore stability.