Britain records slight GDP growth of 0.5% but chancellor warns of 'tough road ahead'
ITV News business and economics editor Joel Hills spoke to the chancellor about recession worries, winter strikes and spiralling inflation.
The UK’s economy rebounded in October after a contraction in September when output was impacted by the extra bank holiday for the Queen’s funeral, according to official figures.
The Office for National Statistics (ONS) said gross domestic product (GDP) grew by a bigger-than-expected 0.5% between September and October in a bounce back from a 0.6% contraction the previous month.
The rebound marked the biggest expansion since November 2021 and was more than the 0.4% rise expected by most economists.
It comes after September was affected by the lower number of working days due to the additional bank holiday for the Queen’s state funeral, and experts said the bigger picture is still one of a shrinking economy amid the cost-of-living crisis, with the UK set to suffer a prolonged recession.
The ONS said the three months to October saw the economy drop by 0.3% compared with the previous three months.
Chancellor Jeremy Hunt said: “While today’s figures show some growth, I want to be honest that there is a tough road ahead."
He added: “Like the rest of Europe, we are not immune from the aftershocks of Covid-19, Putin’s war and high global gas prices.
“Our plan has restored economic stability and will help drive down inflation next year, but also lay the foundations for long-term growth through continued record investment in new infrastructure, science and innovation.”
The Bank of England is still battling to rein in sky-high inflation that is weighing on growth and is set to hike interest rates again on Thursday despite the worsening economic outlook.
Economists are pencilling in a rise from 3% to 3.5% – which would be the highest level for 14 years.
The ONS data showed the services sector – the biggest sector of the economy – expanded by 0.6% in October after a 0.8% drop in September, boosted by a recovery in car sales as well as the health sector due to a ramp up in Covid-19 tests and vaccinations.
The manufacturing sector rose by 0.7% and construction industry saw 0.8% expansion – the fourth monthly increase in a row.
Darren Morgan, ONS director of economic statistics, said: “The economy bounced back in October, recovering from the impact of the additional bank holiday for the state funeral.
“In particular, car sales rebounded after a very poor September, while the health sector also saw a strong month, with GP appointments, A&E attendance and the Covid-19 autumn booster campaign all driving up the sector.
“Construction continued its strong trend over the last year and stands at its highest level on record, with new housebuilding driving growth this month.
“However, over the last three months as a whole the economy shrank, with falls seen across services and manufacturing.”
As Britain records a slight growth in GDP, ITV News Economics Editor Joel Hills asks the chancellor if a recession can be avoided
Mr Hunt said: "I think the likelihood is that we are going to go into recession - that is what Bank and OBR say - and around a third of the world is predicted to be in recession this year or next year, caused by the international energy crisis and aftermath of the pandemic so it is a very challenging situation for us as for other countries around the world."
Chief economist at Pantheon Macroeconomics, Samuel Tombs has predicted the UK has already entered a recession.
He said: “We think that GDP will fall by about 0.3% month-to-month in both November and December, leaving it down 0.2% on a quarter-on-quarter basis.”
As recession worries mount and winter strike action gets underway, the chancellor has urged pay restraint among public sector workers.
He said: "I recognise that there are sincerely held positions by people in the public sector. they do a great job, we saw that in pandemic, but the government has sincerely held concerns not to do anything that locks in high inflation that is ultimately the root cause of their anger.
"Our plan, will see inflation more than half in the next year and if we stick to that plan we can get back to decent economic growth and decent wage growth. It is very important not to do anything that puts that at risk."
He said the Government needs to “stay the course” and carry out its measures aimed at reducing inflation.
It comes as the country is set to be hit by a wave of strikes over the coming weeks as Royal Mail staff, nurses, paramedics, rail employees and Border Force officials all stage walkouts over jobs, pay and conditions.
Plans have been mooted for military staff and civil servants to cover for striking workers in the coming weeks, which will be discussed at a Cobra meeting on Monday.
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