- By Nick Edser & Faisal Islam
- BBC News

Image supply, Getty Images
The UK economy didn’t develop between July and September, figures present, after a succession of interest price rises.
The chancellor mentioned higher rates have been hitting progress, however added that the economy had carried out higher than anticipated this yr.
Forecasters counsel the economy is ready to be stagnant for a number of months but.
Last week, the Bank of England mentioned the UK was prone to see zero progress till 2025, though it’s anticipated to keep away from a recession.
Up till September, the Bank of England had raised interest rates 14 occasions in a row to attempt to tame hovering worth rises.
However, whereas elevating rates can scale back inflation – the tempo at which costs rise – it additionally impacts financial progress by making it dearer for shoppers and companies to borrow cash.
Interest rates are at a 15-year excessive of 5.25%, and are anticipated to stay excessive for a while. Bank governor Andrew Bailey mentioned final week it was “much too early” to be contemplating price cuts.
Paul Dales, the chief UK economist at Capital Economics, mentioned the most recent knowledge steered “the drag from higher interest rates is growing”, however he doesn’t count on the Bank to start out chopping rates till late subsequent yr.
The Office for National Statistics (ONS) mentioned the most recent progress figures confirmed a subdued image throughout all sectors of the economy.
The companies sector noticed a small decline over the three-month interval, whereas manufacturing and the development sector recorded marginal progress.
The Chancellor, Jeremy Hunt, informed the BBC: “Naturally interest rates do have an effect and the judgement of the Treasury is that the principle cause progress has slowed is due to that.
“What is maybe a shock to many individuals is that the economy has been a lot stronger than individuals thought,” he mentioned.
“Most individuals thought it was going to contract this yr. It’s really grown, and that provides us a wonderful basis for the long run.”
Asked if he can be trying to scale back taxes within the Autumn Statement on 22 November, Mr Hunt mentioned he needed to convey the tax burden down, however that enterprise tax cuts would take precedence over private taxes. “I’ve all the time been clear that low taxes are a part of a dynamic, profitable, entrepreneurial economy, however what I’ve mentioned is my precedence is progress, so chopping enterprise taxes is an important factor at this stage,” he mentioned.
Labour’s shadow chancellor Rachel Reeves mentioned the most recent figures have been “additional proof that the economy just isn’t working”, while Liberal Democrat Treasury spokesperson Sarah Olney said the Conservatives had “delivered a hammer blow to our economy main us down a no-growth path”.
Although the speed rises from the Bank are flattening progress, the federal government could really feel a small quantity of reduction that the danger of a proper technical recession – outlined as two consecutive three-month durations of the economy shrinking – has been lowered.
But Prime Minister Rishi Sunak’s vow to “develop the economy” could be very a lot within the stability. Even between July and September, there was a tiny contraction within the economy, although it rounded all the way down to 0.0%.
The progress forecast for the ultimate three months of the yr is between 0% and 0.1%, consistent with different main European nations, that are additionally weighed down by rising rates.
The Bank of England could really feel that it has began to engineer a softish touchdown from final yr’s extreme inflation.
The authorities too will level to subsequent week’s seemingly important fall within the headline price of inflation, when the determine is forecast to gradual from 6.7% to round 4.8% for October.
It could declare victory on that concentrate on on Wednesday, even as its progress goal is now below query.
This could change the backdrop to the Autumn Statement later this month and, if it continues, for the overall election too as it challenges the clear need of Downing Street to color a “turnaround” image.
As the inflation downside eases, the expansion downside might turn out to be extra outstanding.
Fizz Creations’ Dominic Boon says prospects have much less cash to spend
Dominic Boon, finance director of present provider Fizz Creations in Lancing, West Sussex, says it has been a very powerful yr.
The firm is coming into the important thing Christmas interval the place it makes essentially the most of its cash, and Mr Boon has observed shopper confidence dropping.
“People are scuffling with interest rates on their mortgages, on their automobiles, the price of dwelling, heating, fuel, electrical energy. Everything is costing extra – they’ve much less cash of their pockets.”
Down the street is Lucy Iago, who runs her cafe inside Lancing Business Park. “I see individuals have undoubtedly stopped consuming breakfast,” she says, “and their spend per head is clearly going barely decrease. People are being very cautious what they purchase.”
Gross Domestic Product (GDP) figures present the well being of the UK economy. It is a measure – or an try and measure – all of the exercise of firms, governments and people in a rustic.
If the determine is growing, it means the economy is rising and individuals are doing extra work and normally getting a bit of bit richer, on common. But if GDP is falling then the economy is shrinking, which will be unhealthy information for companies.
Darren Morgan of the ONS informed the BBC’s Today programme that whereas the most recent knowledge confirmed a “very flat image” general, there have been indicators of enchancment.
“For instance, greater than half of companies weren’t contemplating elevating their costs in November 2023 – that is the best proportion of companies to inform us this since we first launched that query in April 2022,” he mentioned.
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