London Daily

Focus on the big picture.
Sunday, Oct 04, 2026

Truss and Kwarteng's main plan has been growth - the shrinking figures look like a failing govt

Truss and Kwarteng's main plan has been growth - the shrinking figures look like a failing govt

The latest economy figures show how far away the government's 2.5% growth target is.
The problem for a government that sets a target to grow the economy above all else is that every month it gets a scorecard on progress, and this morning it looks like it's failing.

Strictly speaking, the 0.3% contraction in gross domestic product (GDP) announced for August is not the responsibility of Liz Truss and Kwasi Kwarteng, who have only been in office since 6 September (though the tumult of the last five weeks may make it feel like longer).

But having set an ambition of 2.5% long-term growth and making economic expansion the guiding, and perhaps only, principle of their administration, it does demonstrate the scale of the challenge they and the country face.

The contraction in August was much worse than forecasters expected. Most were betting on a modest amount of growth, even allowing for the depressing effect on productivity of the last summer bank holiday.

Instead there was a decline led by production, which fell 1.8% in the month, with manufacturing of pharmaceuticals and transport equipment the biggest fallers by sector.

There was also downward movement as a consequence of the continued reduction in test and trace and the scale of the vaccine program, a reminder that almost everything counts towards GDP, from the cost of your morning coffee to a GP appointment.

Business Secretary Jacob Rees-Mogg made light of the decline in GDP, telling Sky News that the figure was only a forecast, saying "these figures are very often revised so we should be careful at over-interpreting them".

He is certainly right about revisions. To demonstrate, the ONS revised its July figure for GDP, downwards. It said that as a consequence the economy contracted in the three months to August.

The GDP figure announced may well be revised but arguing about decimal-point changes in output misses a wider point about the challenges facing the economy.

Even before Truss and Kwarteng moved into Downing Street the economy was flatlining, and the Bank of England expects a five month recession to begin this month.

One of the biggest pressures is the ongoing labour squeeze, a factor highlighted as cross-sectoral by the ONS.

"Staff shortages continued to be an issue for businesses with difficulties being reported by businesses working in road haulage, hire of catering equipment, repair and maintenance of motor vehicles, hotels, restaurants and coffee shops, and employment agencies," it reports.

On Tuesday it was revealed that long-term sickness is at a record high with almost 2.5 million unable to work because of illness, and we know almost one in five of those over 50 are on an NHS waiting list.

Add the barriers of Brexit and there are more unfilled vacancies than there are people classified as unemployed, a sign the labour market is struggling to meet current demand, let alone future growth.

And thanks to market volatility, triggered at least in part by Mr Kwarteng's "mini-Budget", businesses now face a steep increase in borrowing costs, while consumers could be challenged by mortgage increases in excess of what they have saved on energy bills thanks to government support.

Add the wider question of financial market stability and confidence in the government's fiscal plan, built around unfunded tax cuts that leave an estimated £60bn hole in the public finances, and it is a deeply challenging environment.

The ONS will be along with the latest score this time next month.
Newsletter

Related Articles

0:00
0:00
Close
UK Police Release Six Iranian Nationals on Bail After RAF Fairford Security Alert
UK Business Confidence Falls as Energy Costs and Tax Uncertainty Rise
Cornwall Insight Warns UK Energy Bills Could Rise 16% in January
UK Introduces Zero VAT on Household Electricity Bills
UK 30-Year Gilt Yield Hits 6% as Bond Market Pressures Intensify
UK Introduces Stricter Subcontractor Checks and Expanded Trade Union Access
Green Party Proposes Three-Year Emergency Freeze on Private Rent Increases
UK Treasury Committee Seeks Tax Clarification Over Manchester City Investigation
Royal Marines Deploy to Faroe Islands for Northern European Security Exercise
UK Business Confidence Weakens as High Costs Delay Investment
UK GDP Growth Revised Up to 0.5% in Second Quarter
Bank of England Warns of Financial Stability Risks From Autonomous AI
UK Expands Early Prisoner Release Scheme to Ease Overcrowding
UK Records Worst Bluetongue Outbreak on Record Across Livestock Farms
UK Government Faces Shrinking Fiscal Headroom Ahead of October 28 Budget
UK 30-Year Gilt Yield Reaches 6% as Energy Shock Drives Borrowing Costs Higher
Church of England to Apologize for Role in Historical Forced Adoptions
UK Defence Ministry Investigates Historical Use of RAF Bases by Jeffrey Epstein
Scottish Housing Completions Fall to 11-Year Low
Welsh First Minister Calls for Expanded Devolution Settlement
UK Pledges £50 Million to Expand Domestic Military Drone Capabilities
UK Opens First Commercial Geothermal Plant in Cornwall
Green Party Wins Gorton and Denton By-Election as Labour Falls to Third
Prime Minister Andy Burnham Opens Review of UK-EU Relationship
UK Inflation Rises to 3.1%, Adding Pressure on Household Finances
UK Removes VAT From Domestic Electricity Bills to Ease Winter Energy Costs
Counterterrorism Police Arrest Sixth Suspect Over RAF Fairford Incident
UK Councils to Receive Sweeping Planning Powers to Ban New Vape and Betting Shops
Chancellor John Healey Faces Tax and Pension Scrutiny Ahead of Autumn Budget
Metropolitan Police Apologise for Accidental Disclosure in High-Profile Investigation
UK Universities Report Record International Enrolment as Housing Pressure Grows
UK Logistics Firms Monitor Rhine Disruption as Low Water Threatens European Supply Chains
UK Food Industry Warns Inflation Could Approach 7%
UK Introduces Vaping Duty and Mandatory Retail Stamps
Scotland Raises Property Taxes and Expands Child Payment in Annual Budget
Greggs Plans Four Factory Closures With 740 Jobs at Risk
OECD Raises UK 2026 Growth Forecast to 1.1%
UK Inflation Rises to 3.1% as Bank of England Faces Rate Debate
Andy Burnham Criticises Brexit and Says Rejoining EU Single Market Remains an Option
UK Imposes New Sanctions on Russian Military Networks and Propagandists
UK Launches Nationwide Early-Release Prison Scheme
Andy Burnham Says Security Services See Signs of Iranian Involvement in RAF Fairford Incident
Manchester City Found Guilty on Premier League Financial Charges After Independent Investigation
Scottish Court to Rule on Bid to Force No-Confidence Vote Against Aberdeen Council Co-Leader
UK Bans Extra Charges for Seating Children Under 12 Beside Accompanying Adults
UK Introduces Vaping Duty and New Licensing Requirements
Greggs to Close Four UK Factories and Cut 740 Jobs
Hundreds of Prisoners Released Early as England and Wales Prisons Reach 98% Capacity
UK Unveils New Russia Sanctions Targeting War Funding and Shadow Fleet
Burnham Says There Are Strong Indications of Iranian Involvement in RAF Fairford Security Breach
×