UK GDP growth for August meet economist expectations of just 0.2% highlighting the fragile state of the economy in the early months of the new Labour government.
“Having brushed aside a 2023 slowdown, the UK economy grew by 0.7% in the first quarter of 2024 and by 0.5% in the second. However, the third quarter got off to a slow start with no increase for July compared with June, which was also a flat month, and only a slight rise for August at 0.2%,” said Rob Morgan, Chief Investment Analyst at Charles Stanley.
“The year-on-year figure of 1.0% growth reflects a mild but bumpy upturn from the low point in the fourth quarter of 2023. Overall, the picture is underwhelming, although still-elevated interest rates continue to act as a headwind.”
The focus will now very much be on the UK government and what they do at the upcoming budget to help promote growth. They were elected on a platform of being pro growth but everything they have done so far has instilled pessimism and undermined confidence in the economy.
“If the rumour mill is to be believed there are some policies being contemplated by the government that could undermine investment and growth,” Rob Morgan said.
“For instance, imposing higher rates of National Insurance on employers could lead to businesses curtailing new hires, limiting pay rises, scaling back pension contributions, or else passing extra costs on in higher prices. For some already-stretched small businesses an additional tax on employing workers could be the nail in the coffin.
“Rumours also circulate surrounding capital gains tax rises which, if enacted, could end up doing more harm than good. Increasing the rate of CGT discourages the regular recycling of capital for investment and incentivises holding onto assets, perhaps unproductive ones, for longer.”