The UK economy ended two months of contraction to return to growth in November, according to the latest official figures.
The Office for National Statistics Gross reported that GDP grew by 0.1% compared to the previous month, slightly less than the 0.2% expected – mixed news for the Government which has made economic growth key to its immediate plans.
Rob Morgan, Chief Investment Analyst at Charles Stanley said the Government had experienced an “unenviable mix of persistent inflation and economic stagnation” and called the figures “a modest reprieve”.
He added: “It’s not a great picture overall though, and we might expect further constraint to growth in the coming months as some businesses choose to retrench in response to the increases to National Insurance announced in the Budget.”
There is a risk that inflation remains on the high side, limiting the scope for interest rate cuts that would help restore business confidence
He said businesses are “enduring a pincer movement of constrictive interest rates and higher costs,” adding: “It’s not all doom and gloom. A significant ray of hope for the UK economy comes from the Bank of England gradually reducing interest rates.
“Plus, many households are now feeling the glow of wage growth trending above price rises. Although pared back by tax rises, this is restoring some spending power lost in the post-Covid inflation surge.
“Yet there is a risk that inflation remains on the high side, limiting the scope for interest rate cuts that would help restore business confidence and stimulate economic activity.”
Martin McTague, FSB National Chair said the figures “will give small firms a measure of hope that interest rates could fall in the near future, something that is badly needed”.
“The Government must now make good on its statements that growth is its number one priority. Its recent call for regulators to put forward suggestions for growth-friendly changes they could make is one small businesses will welcome. Support for small firms must also be at the core of the three strategies which will be unveiled this spring: the Industrial Strategy, the Small Business Strategy and the Trade Strategy.
“Looking ahead, the proposed changes in the Employment Rights Bill are much less promising. With nine in ten small firms expressing concern about the Bill, and with two-thirds saying they are preparing to hire fewer staff, the Bill risks dampening growth, and harming the economy by reducing employment levels and deterring expansion.”
Douglas Grant, Group CEO of Manx Financial Group, felt that the modest rise offers “a glimmer of encouragement. High inflation continues to squeeze costs and consumer spending, while geopolitical instability and fragile supply chains demand diversification and sustainable practices.
“SMEs must prioritise agility in adapting to potential fiscal and regulatory changes, managing cash flow, and leveraging cost-effective AI and digital tools to boost efficiency.”
