The UK’s economy is stumbling to the end of the year
In the same week that the International Monetary Fund gave the UK’s economic growth forecasts a small bump up, the latest GDP figures paint a picture of an economy stumbling to the end of the year after a strong start.
Monthly GDP grew just 0.1%, giving a three-month rate of 0.3% – not exactly exciting figures. Markets will have been hoping for signs that the UK can maintain it’s early-year momentum but it appears that has now dissipated just as we approach a crunch Budget statement from the Chancellor.
Rachel Reeves will need to find a tonic and quickly if she is to extricate the economy from its current malaise, said Lindsay James, Investment Strategist at Quilter.
“There are a number of obstacles coming down the track for the economy too. The IMF confirmed the UK has an inflation problem and is struggling to get out of it. That will continue to put pressure on the consumer.
“Meanwhile, both businesses and individuals are fearful of what is coming at November’s budget after Rachel Reeves confirmed tax rises are being looked at. Last year showed just how much impact that uncertainty can have on economic growth and now this year appears as if it will be no different.”
No festive cheer for businesses
Data released from the Insolvency Service on Friday (17 October) revealed a marginal decrease in the number of corporate insolvencies in September of 2% when compared with August, although the figure was 1.5% higher than September last year.
Given the continued market pressure, insolvencies could exceed 24,000 this year.
“Whilst the marginal reduction in insolvencies is a welcome sign, there is unlikely to be too much festive cheer over the coming months,” said David Kelly, Head of Insolvency at PwC.
“Many businesses, irrespective of their financial position, are finding the market incredibly difficult. This is being driven by a combination of factors, such as limited access the labour, volatile commodity prices and changing consumer spending patterns in the face of increased uncertainty.”
Kelly noted that there is an increased focus on cost control and cash generation.
“We are seeing credit control departments taking a tougher line with customers. Winding up petitions rose by 12% in September, with HMRC behind almost the entirety of that increase, and filing 58% of all petitions.
“Our analysis of the underlying data highlights that construction continues to be the sector under the most pressure, with over 3,200 failures this year, equating to more than 11 failures per day,” he said.
More than 950 restaurants, 580 pubs, and 770 food retailers have experienced failures, highlighting the challenges these sectors currently face. Also of note is that over 170 educational companies have failed this year, at a rate of four per week.
