UK Budget Jitters Send Private Sector Growth to 11-Month Low
Thursday, Oct 24, 2024 5:31 am ET
1min read The UK's private sector growth has reached an 11-month low, according to the latest S&P Global Purchasing Managers' Index (PMI). The slowdown, which comes ahead of the Labour government's first budget since 2010, reflects businesses' uncertainty about the fiscal policies that will be announced on October 30. The PMI fell to 51.7 in October from 52.6 in September, with services and manufacturing sectors both reporting slower growth.
The budget uncertainty has led businesses to adopt a "wait-and-see" approach to major spending decisions, pushing the PMI to its lowest level since November 2022. Companies are particularly concerned about the potential for tax hikes and spending cuts in the budget, which could impact their investment decisions and growth prospects.
The UK economy has been volatile in recent years, with a strong performance in the first half of 2024 followed by a slowdown in the second half. The EY ITEM Club Autumn Forecast downgraded its GDP growth expectations for 2024 and 2025, citing lower household savings and cautious Bank Rate cuts. The CBI's Growth Indicator also showed a softening in the outlook for growth in the three months to December, with manufacturing output expected to fall for the first time in ten months.
The global economic environment, including geopolitical tensions and US elections, has also played a role in shaping businesses' investment decisions and growth expectations. The conflict in the Middle East and Ukraine, as well as the US elections, have added to the nervousness about the economic outlook. Despite these challenges, businesses remain optimistic about the long-term prospects for the UK economy.
As the UK government prepares to unveil its budget, businesses will be watching closely to see how the fiscal policies announced will impact their investment decisions and growth prospects. The budget is an opportunity for the government to build momentum behind the economic recovery and give businesses the confidence they need to invest. Pressing ahead with reforms to planning, publishing a business tax roadmap, and delivering a clear and comprehensive industrial strategy would all help to achieve that goal.
The budget uncertainty has led businesses to adopt a "wait-and-see" approach to major spending decisions, pushing the PMI to its lowest level since November 2022. Companies are particularly concerned about the potential for tax hikes and spending cuts in the budget, which could impact their investment decisions and growth prospects.
The UK economy has been volatile in recent years, with a strong performance in the first half of 2024 followed by a slowdown in the second half. The EY ITEM Club Autumn Forecast downgraded its GDP growth expectations for 2024 and 2025, citing lower household savings and cautious Bank Rate cuts. The CBI's Growth Indicator also showed a softening in the outlook for growth in the three months to December, with manufacturing output expected to fall for the first time in ten months.
The global economic environment, including geopolitical tensions and US elections, has also played a role in shaping businesses' investment decisions and growth expectations. The conflict in the Middle East and Ukraine, as well as the US elections, have added to the nervousness about the economic outlook. Despite these challenges, businesses remain optimistic about the long-term prospects for the UK economy.
As the UK government prepares to unveil its budget, businesses will be watching closely to see how the fiscal policies announced will impact their investment decisions and growth prospects. The budget is an opportunity for the government to build momentum behind the economic recovery and give businesses the confidence they need to invest. Pressing ahead with reforms to planning, publishing a business tax roadmap, and delivering a clear and comprehensive industrial strategy would all help to achieve that goal.
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