London Daily

Focus on the big picture.
Saturday, Oct 31, 2026

Sunak’s tax giveaway fails to spur a speedy economic recovery

Sunak’s tax giveaway fails to spur a speedy economic recovery

Analysis: GDP figures show attempts to revive business investment have not got off to a flying start
If Rishi Sunak hoped his massive tax giveaway in the spring budget to spur business investment would have quick results, the figures for the UK’s national income (GDP) in the second quarter will have proved to be a disappointment.

The amount businesses spent on new kit for the office and machinery for the factory inched higher by 2.4%, but the rise left overall spending on investment 15.3% below pre-pandemic levels.

A lack of business investment was Britain’s achilles heel after the 2008 financial crash, when most of the nation’s growth relied on consumers spending every penny they earned and more. The uncertainty created by the EU referendum and more than four years of debate about how – or even whether – to leave the trade bloc prolonged the agony.

In the budget, the chancellor told businesses they would get £1.30 off their tax bills for every £1 spent over the next two years if the money was dedicated to buying new stuff. It seems that a general nervousness about the future means this particular policy has not got off to a flying start.

The manufacturing industry nudged forward in June, though it registered only a 0.2% increase to leave factories 2.3% short of pre-pandemic levels of output. Construction firms went backwards for the third consecutive month and, most worrying of all, Britain’s trade with the rest of the world suffered a setback.

This left the services industry to generate much of the 1% increase in GDP during June and 4.8% boost to GDP over the second quarter. Increases in advertising, eating out and a degree of normality in the health service, which began to open up to the public for non-Covid-19 consultations after more than a year of restrictions, helped to lift the services sector, the Office for National Statistics (ONS) said.

Worries about the ability of manufacturers and construction firms to produce stronger levels of output as the year rolls on are most likely misplaced. They are both experiencing shortages of materials and skilled staff that are likely to ease over the next few months, even if the struggle to replace eastern European workers in the construction industry persists for many years to come.

However, almost a third of the UK’s GDP is linked to trade and that is suffering badly, with little clarity over when and how it will fully recover. The level of GDP remains 4.4% below pre-pandemic levels, and to recover without the age-old reliance on consumer spending, exports need to rocket.

According to the ONS, while imports and exports of goods to the EU in May and June were above levels recorded at the end of last year, showing a recovery from leaving the single market and customs union, the value of goods exports in June was £14bn compared with about £17bn in 2019. Worse, the upwards trend reversed. Total exports fell 1.5% to £48.7bn in June and goods shipments declined 3.6%.

Trade with the rest of the world was in an even more parlous state. Goods exports to everywhere outside the EU were consistently £2bn above the level of exports to the EU in 2019. Now they are below EU levels.

Brexiters argue that a comparison with the final months of 2020, when the UK was still in the EU customs union, remain valid. But the ONS charts reveal trade dipped in October, November and December 2020 as Boris Johnson wrangled with his own party over how to leave the EU. Unsurprisingly, the biggest increase in trade can be traced from this period.

Likewise, comparisons with February 2020 present a false picture. While it might be used more broadly as the benchmark by the ONS to measure the extent of the bounce back in GDP from pre-pandemic levels, trade was already sliding in January and February 2020 as China, South Korea and much of Asia began to shut down their economies.

So the pandemic was already compounding Brexit uncertainty in the first two months of last year, to leave trade levels artificially low.

Interestingly, in that time France has slipped from being the UK’s fourth largest trading partner to fifth largest behind the Netherlands. According to government figures, in the year to March, trade with France fell by almost a quarter.

It means the recovery has some way to go.
Newsletter

Related Articles

0:00
0:00
Close
Department for Science, Innovation and Technology Prepares Enhanced Artificial Intelligence Safety and Cyber Defense Frameworks
United Kingdom Government Expands International Sanctions Framework Against Russian Shadow Fleet and Financial Enablers
Institute of Directors Reports Sharp Post-Budget Drop in Business Confidence Despite Long-Term Investment Intention Shifts
Chancellor John Healey Defends Sweeping Fiscal Adjustments and Household Support Packages Following Autumn Budget
Parliamentary Petitions Committee Schedules Major Legislative Debates on Special Educational Needs and Non-Stun Meat Labelling
Regional Devolution and Good Growth Fund Frameworks Reshape Local Government Funding Across English Regions
Loughborough University Economic Analysts Highlight Substantial Uncertainty Surrounding Public Sector Efficiency Savings
British Legal Sector Drives Sixty Billion Pounds in Annual Economic Output While Employing Over Half a Million Professionals
Law Society Welcomes New Better Regulation Executive While Pressing for Long-Term Legal Aid Funding Reform
Metropolitan Police and Security Services Heighten Operations Across London Ahead of Large-Scale Public Demonstrations
Bank of England Economists Scrutinize Corporate Tax Adjustments and Public Sector Borrowing Pressures
Chancellor John Healey Defends Autumn Budget Tax and Spending Allocations Following Intense Parliamentary Scrutiny
Department for Environment, Food and Rural Affairs Implements Strict Water Quality Monitoring Rules Following Severe Rainfall and Flooding
Welsh Government Unveils Comprehensive Regional Housing Strategy to Address Rural Affordability and Homelessness Pressures in Cardiff
Office for National Statistics Reports Slowing Consumer Price Inflation and Steady Retail Performance Across United Kingdom Markets
Northern Ireland First Minister Michelle O'Neill and Deputy First Minister Emma Little-Pengelly Advance Cross-Border Infrastructure Agreement in Belfast
Competition and Markets Authority Launches Formal Investigation Into Artificial Intelligence Partnerships Involving Major Technology Corporations
Scottish First Minister John Swinney Secures Cross-Party Support for Devolved Budget Framework and Renewable Energy Expansion
High Court Rules in Favor of Environmental Campaigners Over Department for Energy Security and Net Zero Licensing Procedures
National Health Service England Announces Major Digital Modernization and Artificial Intelligence Diagnostic Rollout Across Regional Trusts
Bank of England Monetary Policy Committee Signals Cautious Approach to Interest Rate Cuts Amid Persistent Wage Growth and Inflation Pressures
British Prime Minister Keir Starmer and Chancellor Rachel Reeves Outline Strategic Infrastructure Plans to Boost Regional Growth and Private Investment
Water pollution remains high despite £5bn investment
Regional Economic Divergence and Industrial Transformation
Technological Sovereignty and Regulatory Scrutiny
Fiscal Consolidation and Public Service Pressures
Automotive Industry Leadership Warns of Imminent Supply Chain Disruptions Following Recent European Trade Negotiations
High Court Delivers Landmark Ruling Affirming Strict Legal Protections for Corporate Data Privacy Against State Surveillance
Welsh First Minister Eluned Morgan Secures Additional Funding for Regional Transport Infrastructure and Rail Modernization
Scottish First Minister John Swinney Announces Major Green Energy Infrastructure Investment Package for Aberdeen
Department for Work and Pensions Proposes Sweeping Welfare Reforms to Incentivize Long-Term Unemployed Back into Work
Competition and Markets Authority Launches Formal Investigation into Artificial Intelligence Partnerships Involving Major Tech Giants
United Kingdom Foreign Secretary David Lammy Concludes High-Level Strategic Talks in Washington on Middle East Security
National Health Service England Unveils Emergency Winter Resilience Plan to Combat Projected Surge in Emergency Admissions
Bank of England Governor Andrew Bailey Signals Cautious Approach to Interest Rate Cuts Amid Persistent Inflation
British Chancellor Rachel Reeves Finalizes Corporate Tax Overhaul Ahead of Autumn Budget to Fund Public Services
Automotive Manufacturers Urge Government Action as High Energy Costs and Global Supply Chain Disruptions Threaten Production
Metropolitan Police Issue Formal Apology Following Inadvertent Release of Confidential Information During High-Profile Investigation
Scottish Finance Secretary Shona Robison Unveils Devolved Budget Highlighting Housing and Public Service Adjustments
Energy Regulator Office of Gas and Electricity Markets Prepares to Remove Household Gas Standing Charges Following Treasury Mandate
Treasury Confirms Reversal of Planned Cash Individual Savings Account Allowance Reduction Protecting Twenty Thousand Pound Limit
Office for Budget Responsibility Revisions Predict Moderate United Kingdom Economic Growth with Elevated Inflation Pressures
Chancellor John Healey Delivers First Autumn Budget in Parliament Highlighting Temporary Bank Surcharge and Cost-of-Living Support
Met Office Issues Extended Forecast Highlighting Stable High Pressure Weather Patterns Across the United Kingdom
Scottish Finance Secretary Shona Robison Outlines Changes to Tax Thresholds and Residential Property Levies in Edinburgh
Financial Markets and Government Bond Yields Remain Stable Following Muted Reaction to Autumn Budget Measures
Defence Committee Chair Tan Dhesi Criticizes Budget for Delaying Critical Defence Spending Decisions to Next Year
International Monetary Fund Forecasts United Kingdom Economic Growth at One Point Three Percent for Year
Office for Budget Responsibility Assesses Fiscal Headroom Reduced to Fifteen Billion Pounds Following Global Energy Shocks
Chancellor John Healey Delivers First Autumn Budget Introducing Household Energy Support and Bank Tax Hikes
×