Rachel Reeves has been accused of “dragging the economy into stagnation” with her reference to a “£22bn black hole” in the public finances. Official data revealed that November’s growth fell short of expectations.
In the October Budget, the Chancellor raised taxes by £40bn, repeatedly warning prior to the event that her economic inheritance would force her to mend the public finances.
Despite inheriting the fastest-growing economy among the G7 during the first half of last year, the UK’s economy grew by only 0.1% in November after experiencing five consecutive months of stagnant growth.
Consequently, consultancy Pantheon Macroeconomics revised its forecast for the fourth quarter to predict stagnation, down from an earlier projection of 0.1% growth.
Chief UK economist Rob Wood commented, “Budget tax hikes, coupled with global uncertainty over Mr Trump’s potential policies, dragged the economy into stagnation in the second half of last year, and November’s GDP offered little relief.” He added that GDP growth significantly slowed during the summer, coinciding with the new government’s warnings about impending tax hikes.
Anna Leach, chief economist at the Institute of Directors, noted, “November saw our Economic Confidence Index hit a new post-Covid low as business leaders grappled with a Budget for business that fell short of expectations. It now appears that the economy is likely to grind to a halt in the second half of 2024.”
