Britain stuck as a ‘stagnation nation’ as GDP data lay bare the challenges for the Autumn Statement

The UK economy was flat in the third quarter of 2023, highlighting the scale of the challenge facing the country in delivering sustained economic growth over the coming decade, the Resolution Foundation said in response to the latest ONS data.

The economy unexpectedly expanded by 0.2 per cent on the month in September, avoiding a recession by the narrowest of margins – for now. But with the all-important service sector contracting by 0.1 per cent in Q3 and signs of weak domestic demand – household consumption and business investment fell by 0.4 per cent and 4.2 per cent respectively – there are clear signs that higher interest rates are slowing the economy.

The Foundation notes that the UK economy has expanding just 1.1 per cent since the Bank of England started raising rates to fight high inflation in Q4 2021, around half the G7 Average of 2.1 per cent.

Over the past 15 years, GDP per capita has risen by just 0.6 per cent per year on average, down from 2.2 per cent pre-financial crisis, and below the average for the US, France and Germany, of 0.8 per cent.

James Smith, Research Director at the Resolution Foundation, said:

“The UK economy has stagnated again in recent months, driven in part by the rapid rise in interest rates since late 2021. There is a real risk that the UK could fall into recession for the fourth time in 15 years.

“Britain is a stagnation nation that has struggled to secure sustained economic growth since the financial crisis. Addressing this is the central task we face as a country, and must be at the heart of the Chancellor’s Autumn Statement in 10 days’ time.”