UK economy beats expectations with November growth

Growth slowed sharply from October, partly due to strike action.

In Summary
  • The UK's gross domestic product (GDP) - a key economic measure of services, construction and manufacturing output - rose by 0.1%.
  • The Office for National Statistics (ONS) said pubs and restaurants contributed to growth as people went out to watch the football.

The UK economy unexpectedly grew in November, helped by a boost from the World Cup, official figures show.

The UK's gross domestic product (GDP) - a key economic measure of services, construction and manufacturing output - rose by 0.1%.

The Office for National Statistics (ONS) said pubs and restaurants contributed to growth as people went out to watch the football.

However, growth slowed sharply from October, partly due to strike action.

Rail workers and Royal Mail staff staged walkouts over pay and working conditions in November. Darren Morgan, director of economic statistics at the ONS, told the BBC's Today programme: "We definitely saw the impact of industrial action in today's figures.

"We saw reasonably large falls in rail transport, postal work and warehousing and this sector had the biggest drag on the economy in November."

There was continued industrial action in December, which widened to include NHS workers as well as Border Force staff at six UK airports.

Despite the boost to economic growth in November, it is not clear if the UK will avoid a recession this year.

The 0.5% rise recorded in October was largely as a result of a bounceback from businesses shuttering to mark Queen Elizabeth II's funeral in September.

A recession is defined as two three-month periods, or quarters, of shrinking economic output in a row.

When a country is in recession, it is a sign that its economy is doing badly. During a downturn, companies typically make less money and the number of people unemployed rises. Graduates and school leavers also find it harder to get their first job.

Between July and September, UK economic output shrank by 0.3%.

Although there might have been a brief improvement in November, the Federation of Small Businesses (FSB) warned that concerns over the economy haven't yet been laid to rest.

The UK is continuing to battle the pace of price rises, or inflation, which is at a 40-year high largely due to soaring energy bills. The Bank of England has announced a number of interest rate rises since December 2021 to cool consumer demand and combat soaring costs.

The national chair of the FSB, Martin McTague, said: "With costs remaining high for small firms and households alike, policymakers cannot rest on their laurels. Inflation needs to be brought down, there remains huge uncertainty over energy prices and consumer confidence remains stubbornly low."

'The next 12 months are going to be tough'

At Gtech in Worcester, they've definitely noticed the economy slowing down.

The company designs and sells cordless vacuum cleaners, lawnmowers and other tools. After a busy pandemic, when people were keen to invest in keeping their homes and gardens looking nice, this year demand has begun to decline.

"We can feel that, yes, there's probably a recession coming on, people are finding things difficult," suggests Nick Grey, founder of the business. "They're kind of worried about their basic costs of heating and fuel and all the rest of it and the worries of inflation."

Black Friday at the end of November was busy, but December was "very, very slow," he says.

Gtech products are designed to be durable and energy-efficient - which should appeal to thrifty consumers. But they're reducing their spending on marketing, as businesses often do in recessions.

The firm gave its staff a £1,000 cost-of-living payment in December, and gave its lower-paid staff a relatively more generous pay rise than the senior workers, as they are more affected by rising costs.

"I think the next 12 months are going to be tough," says Mr Grey. "We're just trying to make sure we do the basics well, and that when all this blows over, we're positioned well to grow and recover."

Responding to the latest economic figures, Chancellor Jeremy Hunt said: "We have a clear plan to halve inflation this year - an insidious hidden tax which has led to hikes in interest rates and mortgage costs, holding back growth here and around the world."

But shadow chancellor Rachel Reeves said: "The news of further economic pain will be deeply concerning to families already struggling with the soaring cost of living."

Pantheon Macroeconomics said whether or not the UK is already in recession, potentially causing more pain for households, is "hanging in the balance".

The ONS's Mr Morgan said the economy would have to shrink by 0.6% in December to send the UK into a slowdown.

He said that one in six businesses have told the ONS "they have been affected as a result of industrial action so we would have to see how the impact of industrial action feeds into our December figure in a few weeks' time".

Pantheon said a big fall in GDP is possible in December "given that all the main business surveys point to falling production, and both heavy snowfall and, to a lesser extent, rail strikes likely weighed temporarily on activity".

While the manufacturing sector shrank in November and construction stagnated, the services sector, which includes a wide range of industries from hospitality to accountancy, grew.

"Employment agencies did reasonably well and perhaps that reflects those businesses seeking support to fill the vacancies they have which we know from our labour market figures has been an issue in certain sectors," Mr Morgan said.

The ONS also said that there was "anecdotal evidence" to suggest that the Fifa World Cup had benefited some businesses such as pubs and restaurants as well as sales of wine and demand for pizza delivery.

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