Today’s Index of Production also revealed that the UK economy contracted by 0% in July, according to official ONS figures. Rachel Reeves, the new Chancellor, is due to announce the government’s tax and spending plans on November 26. This lack of progress gives cause for alarm in the lead-up to her announcement. Much guesswork is already swirling that says Reeves will be forced to raise taxes because of the current economic situation.
Yael Selfin, chief economist at KPMG UK, expressed that the delayed date of the Autumn Budget could exacerbate uncertainties for businesses. Uncertainty like this will cause companies to delay investment decisions, which in turn would significantly further delay economic growth until the picture becomes clearer.
Even with this bleak economy, some bright spots existed. Liz McKeown, director of economic statistics at the Office for National Statistics (ONS), noted that services performed well in July. In particular, health services, computer programming services, and office administrative services all exhibited strong growth in this time span.
“Within services, health, computer programming and office support services all performed well.” – Liz McKeown, director of economic statistics at the ONS
Yet, nationally, McKeown pointed out, the overall manufacturing sector took a hit. She stated, “The falls in production were driven by broad-based weakness across manufacturing industries.” This new wave of manufacturing disruption is yet another headwind to a nascent economy trying to stage a comeback from multiple recent contractions.
The next Autumn Budget must address these urgent concerns. Finally, it helps provide a clear, bipartisan fiscal framework for the coming years. On the business side, industry is sure to remain risk averse. They’re looking for greater certainty about the federal government’s intentions for future tax hikes and spending.
“The later date of the Autumn Budget could prolong some uncertainties for businesses, delaying investment decisions and acting as a drag on growth until more clarity emerges.” – Yael Selfin, chief economist at KPMG UK
