Budget Uncertainty Hits UK Growth, Reports Suggest --[Reported by Umva mag]

Uncertainty over Labour’s budget next Wednesday, 30 October—the party’s first since 2010—is hitting the UK economy, says one of two business surveys released recently. Activity in the UK’s private sector eased to an eight-month low in September with both services and manufacturing suffering a slowdown, reports S&P Global. 

Actually, many businesses said that clients have adopted the “wait-and-see” approach to decision-making regarding any investment ahead of the autumn budget. Many such plans are therefore being slowed down by the same factor. For Chancellor Rachel Reeves, who wants to stimulate business investment to improve growth prospects, this is a challenge since the S&P survey indicated that the forthcoming budget is “by far the most cited concern among UK private sector firms,” contributing to a subdued outlook. 

The survey showed that overseas sales and export orders reported were still basically very weak, although there was an insignificant increase in total overseas sales. Though some service providers reported high demand from U.S. clients, manufacturing was one of the areas that manufacturers commonly complained about declining sales in the EU as a factor badly affecting export order. 

Separately, the Confederation of British Industry found manufacturers said the export order books were the weakest since December 2020 – at the very beginning of the Covid-19 pandemic and before the Brexit trade deal. “This was uniformly disappointing”, said the CBI, in its industrial trends report which found a net balance of -44% of manufacturers saying that their export order books were below normal, down significantly from -22% in August. 

According to CBI’s lead economist, Ben Jones, the recovery seen in the UK economy in the first half of 2024 will prove fragile, and diverge between sectors. Businesses are becoming increasingly cautious following the advent of the budget. 

Despite growing concerns over tax increases and easing growth, the S&P survey indicated the 11th month in a row that activity is improving, both in services and manufacturing, with companies seeking to increase orders over the coming 12 months. The flash UK PMI composite output index edged down to 52.9 in September from 53.8 in August, its third month running above 50, which lies above the threshold separating growth from contraction, though inflation appears to be calming, at least insofar as companies are baulking at accelerating the rise at the same pace. 

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