This morning has brought more disappointing news for the UK economy.
UK real gross domestic product (GDP) is estimated to have increased by an unrevised 0.1% in Quarter 3 (July to Sept), compared with growth of 0.2% in Quarter 2 (Apr to June) 2025.
At first there is some relief that the third quarter was not revised lower. But then one spots that the second quarter of 2025 was. So we have gone 0.2% and then 0.1% in the latest tow quarters and we know that subsequently October as a single month fell by 0.1%. So as Paul Simon put it.
Slip slidin’ awaySlip slidin’ awayYou know the nearer your destinationThe more you’re slip slidin’ away
If we look at the latest quarter we see that the downwards trend is also in the detail.
Services output increased by an unrevised 0.2% in Quarter 3 2025, following growth of 0.3% in Quarter 2 (Apr to June) 2025.
Plus there was a suggestion of weakness from consumers.
Non-consumer-facing services (business-facing services) increased by 0.2% in Quarter 3 2025, while consumer-facing services fell by 0.1%.
There was some more cheerful news from production.
The production sector is estimated to have fallen by 0.3% in Quarter 3 2025 (previously estimated as a 0.5% fall), following a 0.7% decline in the previous quarter. Production output is 0.2% lower, compared with the same quarter a year ago, revised up from the first estimate of 0.9% lower.
But the kicker or nuance is my deindustrialisation theme caused by high energy prices.
The fall in production in Quarter 3 2025 was mainly because of a decline of 0.8% in manufacturing and 0.4% in mining and quarrying.
The manufacturing decline is in a way linked to the mining and quarrying one as we refuse to further exploit North Sea Oil and Gas and instead sub-contract that job to Norway. Speaking of government policy the target of building 1.5 million new homes in this Parliament is not going to be helped by this.
Construction output is estimated to have increased by 0.2% in Quarter 3 2025, following growth of 1.2% in the previous quarter. Repair and maintenance increased by 1.0%, and new work fell by 0.3% in the latest quarter.
The overall picture looks like it might be rescued a little by the end of last year.
with Quarter 4 (Oct to Dec) 2024 revised up 0.1 percentage points
But then we discover that the answer to that is no.
The level of real GDP in Quarter 3 2025 compared with Quarter 4 2023 is now estimated to be 2.9% higher, revised down slightly from the first estimate of 3.0%.
Stagflation
We end up being reminded of this in spite of the story looking like it starts well with a downwards revision.
Nominal GDP is estimated to have increased by 1.0% in Quarter 3 2025 (revised down from the first estimate of 1.2%), and is now 4.8% higher, compared with the same quarter a year ago. The level of nominal GDP in Quarter 3 2025 compared with Quarter 4 2023 is now estimated to be 10.7% higher, revised up slightly from the first estimate of 10.6%.
So since the end of 2023 we have had economic growth of 2.9% and inflation of 10.7%.
The CBI
The Confederation of British Industry or CBI rather lacks Christmas cheer.
PRIVATE SECTOR DOWNTURN SET TO CONTINUE INTO Q1 2026 The CBI’s latest surveys suggest that firms expect activity to fall again in the first quarter of 2026, extending a period of weakness that began in late 2024.
Looking at the detail confirms the poor outlook.
A broad-based decline is expected · Business & professional services: -24% · Consumer services: -46% · Distribution: -47% · Manufacturing: -17% [Figures shown are net balances – the percentage of firms expecting an increase in output/activity, minus those expecting a decrease]
They are downbeat on employment as well.
Hiring plans soften Expectations for employment growth over the next three months are at their weakest since August 2020.
Chancellor Rachel Reeves adds to the gloom
You might think that after the way that spreading gloom has affected the UK economy that Chancellor Rachel Reeves would be extra careful about it. After all her emergency breakfast address on November 4th was a classic of the genre but not in a good way.
Reeves: I can’t rule out more tax rises next year ( The Telegraph)
With things looking troubled she is putting oil on the fire there. Of course it is a difficult area for her as she claimed the tax increases were complete last year then had to come back for more this year ( which is another brake on the economy)
She was interviewed by the i-paper as she presumably thought it would go easy on her.But even it pointed out this.
The UK’s tax burden is now at its highest since the Second World War, after Reeves increased taxes by £26bn last month, following a £40bn rise in her first Budget.
She came under intense scrutiny for last month’s tax rises, having previously claimed that she would not be “coming back with… more taxes”.
Then we got this.
The Chancellor said she hopes “further changes to taxes are less necessary” due to the £22bn of fiscal headroom left after the Budget, but she would not commit to no further tax increases.
She said: “The Budget was just a couple of weeks ago, and I made my decisions in that Budget. It would be wrong to start writing future Budgets just a couple of weeks after the last Budget.
Apparently fantasy numbers years in the future cannot be spent now. Who knew?
“What I did do in the Budget a couple of weeks ago was increase the fiscal headroom that the Government has, more than doubled that, which means that when further disruption and shocks come our way… we’re better able to withstand those sorts of shocks, which will hopefully mean further changes to taxes are less necessary.”
House Price Pumping
Then we got rather a pivot to some house price pumping and indeed pimping.
She added: “The world is incredibly volatile at the moment. The best thing we can do to help people get on the housing ladder is to ensure that interest rates stay low, [and] continue to come down, so that more young people [and] families can get on the housing ladder.”
Even economics 101 would point out that lower interest-rates tend to raise house prices making them more expensive. Also the next bit is embarrassing once anyone looks at the actual house building figures.
Reeves has long accused slow UK housebuilding of holding back economic growth. She told The i Paper she remains “committed” to Labour’s goal of building 1.5 million new homes by 2029 and that she wants to help first-time buyers take on bigger mortgages in order to boost home ownership.
You really could make “take on bigger mortgages” up! The theme here was also pushed by the Financial Conduct Authority which I looked at last Tuesday and the same for the Bank of England on Friday.
Comment
There is an air of “let them eat cake” here although it is doubtful Marie Antoinette in fact said it. The policy for growth known as house building has hit the buffers so far and the economy otherwise is weak. So they return to the age old policy of house price pumping except of course they depressed some areas with the Mansion Tax. Do they actually know what their policy is?
Yet the currency is doing okay as it moves above US $1.34 and 211 Yen
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