UK economy edges forward in November, but stagnation fears persist

Britain's economy inched forward in November, growing by 0.1 percent after contracting the two months before. The gain was real enough to reverse the previous decline, but it fell short of what economists had predicted. They had forecast growth of 0.2 percent, and the shortfall only deepened a worry that has been building for months: the UK may be sliding into a prolonged period of economic stagnation.

Chancellor Rachel Reeves welcomed the expansion as evidence that the economy was responding to her October budget. The Treasury had reason to want good news. The previous two months had shown weakness, and the broader picture was worse still. Over the three months ending in November, the economy had grown by zero percent. Manufacturing had contracted by one percent over that same quarter, while the services sector—which includes restaurants, pubs, wholesalers, and IT firms—had flatlined. Construction managed some growth, driven by new commercial projects, but production continued its slide, with declines across manufacturing, oil and gas extraction, and other industrial sectors.

Simon Pittaway, a senior economist at the Resolution Foundation, called the figures disappointing. He noted that Britain's recent economic history had been volatile—a recession in late 2023 followed by a rebound in early 2024—but the longer trajectory pointed toward something more troubling. "The UK has been a growth rollercoaster," he said, "but its longer-term record is one of economic stagnation, and that is where Britain risks returning to." The Office for National Statistics director of economic statistics, Liz McKeown, described the economy as "broadly flat," having grown slightly in November after two small declines.

The weakness in the data made an interest rate cut from the Bank of England more likely. Money markets now priced in an 83 percent probability that the central bank would lower rates at its next meeting on February 6. Suren Thiru, economics director at ICAEW, warned that even if rates fell, the combination of low growth and relatively high inflation—which had unexpectedly dropped from 2.6 percent to 2.5 percent in December—would probably persist and weigh on households and businesses.

Reeves attributed the sluggish growth to "14 years of economic stagnation" under the previous government and said her priority was to "kickstart growth." She planned to meet with the heads of financial regulators on Thursday to press them on what more they could do to support expansion. Prime Minister Keir Starmer, speaking from Ukraine, echoed the message, saying the government would be "unrelenting" in driving the economy forward through changes to planning rules and regulation. "It was always going to take time to turn around 14 years of economic failure," he said, framing the current figures as "a step in the right direction."

Opposition shadow chancellor Mel Stride offered a sharply different reading. He noted that UK growth in the first half of 2024, before Labour took office, had been the fastest in the G7, but had since slowed. He accused Reeves of "killing investment and jobs" and called the latest figures a "crisis made in Downing Street." Stride pointed out that this was the third consecutive month of disappointing growth.

Business secretary Jonathan Reynolds flagged another risk hanging over the outlook: the potential for a tariff war following Donald Trump's return to the White House. Reynolds said he was worried about the impact on the UK, which is heavily dependent on global trade. "The UK is a very globally orientated economy," he told Sky News, "so the exposure, the danger to the UK, is actually greater than even some comparable countries." The pound dipped slightly against the dollar on the day the figures were released, falling a third of a cent to $1.22.

The Bank of England had already pencilled in zero growth for the fourth quarter of 2024, meaning the economy could end the year having produced no expansion at all. Whether the modest rebound in November signals a genuine turning point or merely a pause in a longer drift toward stagnation remains unclear. The data will matter enormously in the coming weeks as the central bank prepares to decide whether to cut rates and as the government races to show that its growth agenda is beginning to take hold.