By William Schomberg and Suban Abdulla
LONDON (Reuters) – British economic output grew again in November but expanded less than expected in the first month after Finance Minister Rachel Reeves announced big tax increases for businesses.
The gross domestic product increased 0.1% compared to October, according to official data, which represents the first month-on-month increase since August, after the falls in September and October. However, economists polled by Reuters had mostly forecast a 0.2% rise.
Reeves, whose Oct. 30 budget included big increases in social security contributions paid by employers, said after the data was released that she was “determined to go further and faster to drive economic growth.”
He will meet regulators on Thursday to discuss what they can do to help the Labor government deliver on its promise to voters to speed up the economy.
Ben Jones, chief economist at the Confederation of British Industry, said a mood of caution had gripped UK businesses since the budget.
“Many companies are entering 2025 focusing on reducing operating spending, which will likely impact wages, hiring and investment in the coming months,” Jones said.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said Thursday’s data showed the gloomy mood continues for the UK economy due to budget tax increases and global uncertainty after Donald’s victory. Trump in the United States presidential elections.
The Bank of England seemed certain to cut rates in February, Wood said, “but we think the outlook remains brighter than the data for late 2024 suggests, and talk of recession risk is misplaced.”
The pound fell, losing about a fifth of a cent against the US dollar before recovering some of that loss.
The Office for National Statistics said Britain’s services sector grew slightly in November with wholesalers, pubs and restaurants and IT firms performing well, but manufacturers and oil and gas companies They had a weaker month.
The British economy, which was slow to recover from the COVID-19 pandemic, showed zero growth in the third quarter as uncertainty over the upcoming budget hit businesses. The Bank of England expects economic growth to have stagnated in the final three months of 2024.
However, an increase in public spending is expected to cause growth to accelerate in 2025.
Concerns about weak growth contributed to a recent rise in British government borrowing costs before they fell sharply on Wednesday after a surprise drop in inflation in the country and price growth data in the United States.
Lindsay (NYSE:) James, investment strategist at Quilter Investors, said the full impact of the budget was yet to come, with tax increases set to begin in April.
“Businesses will soon feel the effects of increased national insurance contributions,” James said. “Furthermore, Trump’s inauguration is approaching and the true effects of his policies will begin to be felt later this year.”
The Labor government says it is aiming for the fastest per capita growth in gross domestic product among the Group of Seven advanced economies.
Compared with a year earlier, economic output was 1.0% higher in November, the ONS said, weaker than the 1.3% expansion forecast by economists.