UK economy grew less than first thought GDP figures show – what it means for your money

THE UK economy stagnated more than first thought in the third quarter of this year amid fears over low growth.

The Office for National Statistics (ONS) said GDP showed no growth between July and September, revised down from an estimated 0.1% rise previously.

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It means the UK economy has either shown no growth or shrunk since July this year in a blow for the government.

The latest monthly GDP (Gross Domestic Product) data revealed the UK economy unexpectedly shrunk in October by 0.1%.

The ONS said there was no growth in the services sector between July and September while a 0.7% increase in the construction sector was offset by a 0.4% fall in production.

Meanwhile, it said early estimates suggested real households' disposable income per head show no growth in the third quarter.

This follows growth of 1.4% in between April and June.

Liz McKeown, director of economic statistics at the ONS, said: "The economy was weaker in the second and third quarters of this year that our initial estimates suggested, with bars and restaurants, legal firms and advertising, in particular, performing less well.

"Meanwhile real household disposable income per head showed no growth."

The latest revised data comes after the Prime Minister was warned the UK economy was "headed for the worst" with firms set to cut back on production and hire fewer staff in the new year.

The survey by the Confederation of British Industry revealed the upcoming hike to employer National Insurance contributions (NICs) was given as one of the main reasons for the sense of gloom.

Services sector business is expected to decline, while manufacturing output is also anticipated to fall sharply between January and March.

Alpesh Paleja, of the CBI, said: “There is little festive cheer in our latest surveys, which suggest the economy is headed for the worst of all worlds.

"Firms expect to reduce both output and hiring, and price growth expectations are getting firmer.

“Businesses continue to cite the impact of measures announced in the Budget, particularly the rise in employer NICs, exacerbating an already tepid demand environment."

What it means for your money

GDP measures the economic output of companies, individuals and governments.

If it is rising steadily, but not too much, it is a sign of a health and prosperous economy.

This is because it usually means people are spending more, the government gets more tax and workers get better pay rises.

It also generally means lower inflation as companies don't have to up their prices to cover for shortfalls in their coffers.

The Bank of England (BoE) also uses GDP and inflation as key indicators when determining the base rate.

This decides how much it will charge banks to lend them money and is a way to try to control inflation and the economy.

Usually when inflation is low, the BoE would cut interest rates to try to speed the economy up.