Latest economic data
The UK’s private sector recorded its weakest growth since May, according to new figures released this week.
The S&P Global Flash Composite Output Index fell to 51 in September – just above the threshold that separates growth from contraction.
Economists had forecast a stronger performance, making the results a disappointment for both the government and financial markets.
The slowdown suggests that the economy is struggling to build momentum after more than a year of subdued activity.
Rising costs, weak overseas demand and uncertainty over the government’s fiscal plans were all cited by firms as key concerns.
Pressure on employers
The data also pointed to cooling demand for labour. Several businesses reported freezing recruitment, while others said they were not replacing staff who left voluntarily.
Analysts suggest this may be an early sign of loosening in what has so far been a tight labour market. A slowdown in hiring could increase pressure on households already dealing with higher living costs.
At the same time, input costs for businesses have remained stubbornly high, particularly in energy and imported goods. With limited ability to pass these increases on to customers, margins are being squeezed, adding to the cautious outlook.
Wider global context
The UK’s figures mirror a trend seen across much of Europe, where growth is stagnating. In Germany and France, output data also disappointed, with firms citing weak consumer spending and fragile exports. Globally, demand for manufactured goods remains sluggish, with only modest signs of improvement in services.
The Organisation for Economic Co-operation and Development (OECD) has forecast UK growth of 1.4% in 2025 and just 1 per cent in 2026. Those predictions are among the lowest for any G7 country, underlining the scale of the challenge facing the government.
Political implications
For Prime Minister Keir Starmer, the weak data is a political headache. His government has promised to deliver stronger growth and attract investment, but businesses are becoming increasingly vocal about the lack of clarity over future tax and regulatory policy. The Autumn Budget will now take on added significance, as both markets and employers look for measures that can restore confidence.
What comes next
Economists warn that unless investment picks up, the UK risks entering another period of stagnation. With inflation still higher than in most advanced economies and productivity growth stalled, the government’s options are limited. The coming months will determine whether Britain can avoid sliding back into economic drift – or whether the hopes of a post-pandemic rebound will fade once again.
