The British economy failed to expand in the third quarter, according to revised official figures on Monday, which dealt a fresh blow to the new government of Prime Minister Keir Starmer.
The Office for National Statistics (ONS) lowered its estimate for the change in gross domestic product (GDP) output to 0% in the July-to-September period, down from a previous estimate of 0.1% growth.
The ONS also reduced its estimate of second-quarter growth to 0.4% from 0.5%.
Starmer and his finance minister, Rachel Reeves, took power in early July, warning of the poor state of the economy before announcing tax increases for employers in a budget on Oct. 30.
Last week, the Bank of England (BoE) forecasted that the economy would show zero growth in the fourth quarter. However, borrowing costs were kept on hold because of the risks posed by inflation.
Paul Dales, the chief U.K. economist at consultancy Capital Economics, said the GDP downgrade was caused in part by weaker demand for exports, while consumer spending at home held up.
"Our hunch is that 2025 will be a better year for the economy than 2024," Dales said. "But more recent data suggest the economy doesn't have much momentum as the year comes to a close."
A separate survey from Lloyds Bank showed confidence among businesses fell to its lowest level of 2024 in December.
Data from the Confederation of British Industry (CBI) – based on previously released surveys – showed companies expected activity to fall in the first three months of 2025.
Alpesh Paleja, a CBI economist, said the figures "suggest that the economy is headed for the worst of all worlds – firms expect to reduce both output and hiring, and price growth expectations are getting firmer."
The government's hike in social security contributions for employers was exacerbating weak demand, Paleja said.
Reeves said Monday's GDP data showed she faced a huge challenge "after 15 years of neglect" under previous Conservative-led governments but that her budget would create sustainable long-term growth.
The ONS said there was no growth in the services sector in the third quarter. A 0.7% increase in construction was offset by a 0.4% fall in production.
Bars and restaurants, as well as legal firms and advertising, were among the weakest sectors in the three months to the end of September, it said.
The data also showed no growth in living standards and that households had dipped into their savings.
The ONS said Britain's current account deficit shrank to 18.1 billion pounds ($22.7 billion) in the third quarter from 24 billion pounds in the April-to-June period.
The Reuters poll of economists had pointed to a shortfall of 22.5 billion pounds.
