London Daily

Focus on the big picture.
Wednesday, Jan 07, 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
Béla Tarr, Visionary Hungarian Filmmaker, Dies at Seventy After Long Illness
UK and France Pledge Military Hubs Across Ukraine in Post-Ceasefire Security Plan
Prince Harry Poised to Regain UK Security Cover, Clearing Way for Family Visits
UK Junk Food Advertising Ban Faces Major Loophole Allowing Brand-Only Promotions
Maduro’s Arrest Without The Hague Tests International Law—and Trump’s Willingness to Break It
German Intelligence Secretly Intercepted Obama’s Air Force One Communications
The U.S. State Department’s account in Persian: “President Trump is a man of action. If you didn’t know it until now, now you do—do not play games with President Trump.”
Fake Mainstream Media Double Standard: Elon Musk Versus Mamdani
HSBC Leads 2026 Mortgage Rate Cuts as UK Lending Costs Ease
US Joint Chiefs Chairman Outlines How Operation Absolute Resolve Was Carried Out in Venezuela
Starmer Welcomes End of Maduro Era While Stressing International Law and UK Non-Involvement
Korean Beauty Turns Viral Skincare Into a Global Export Engine
UK Confirms Non-Involvement in U.S. Military Action Against Venezuela
UK Terror Watchdog Calls for Australian-Style Social Media Ban to Protect Teenagers
Iranian Protests Intensify as Another Revolutionary Guard Member Is Killed and Khamenei Blames the West
Delta Force Identified as Unit Behind U.S. Operation That Captured Venezuela’s President
Europe’s Luxury Sanctions Punish Russian Consumers While a Sanctions-Circumvention Industry Thrives
Berkshire’s Buffett-to-Abel Transition Tests Whether a One-Man Trust Model Can Survive as a System
Fraud in European Central Bank: Lagarde’s Hidden Pay Premium Exposes a Transparency Crisis at the European Central Bank
Trump Announces U.S. Large-Scale Strike on Venezuela, Declares President Maduro and Wife Captured
Tesla Loses EV Crown to China’s BYD After Annual Deliveries Decline in 2025
UK Manufacturing Growth Reaches 15-Month Peak as Output and Orders Improve in December
Beijing Threatened to Scrap UK–China Trade Talks After British Minister’s Taiwan Visit
Newly Released Files Reveal Tony Blair Pressured Officials Over Iraq Death Case Involving UK Soldiers
Top Stocks and Themes to Watch in 2026 as Markets Enter New Year with Fresh Momentum
No UK Curfew Ordered as Deepfake TikTok Falsely Attributes Decree to Prime Minister Starmer
Europe’s Largest Defence Groups Set to Return Nearly Five Billion Dollars to Shareholders in Twenty Twenty-Five
Abu Dhabi ‘Capital of Capital’: How Abu Dhabi Rose as a Sovereign Wealth Power
Diamonds Are Powering a New Quantum Revolution
Trump Threatens Strikes Against Iran if Nuclear Programme Is Restarted
Apple Escalates Legal Fight by Appealing £1.5 Billion UK Ruling Over App Store Fees
UK Debt Levels Sit Mid-Range Among Advanced Economies Despite Rising Pressures
UK Plans Royal Diplomacy with King Charles and Prince William to Reinvigorate Trade Talks with US
King Charles and Prince William Poised for Separate 2026 US Visits to Reinforce UK-US Trade and Diplomatic Ties
Apple Moves to Appeal UK Ruling Ordering £1.5 Billion in Customer Overcharge Damages
King Charles’s 2025 Christmas Message Tops UK Television Ratings on Christmas Day
The Battle Over the Internet Explodes: The United States Bars European Officials and Ignites a Diplomatic Crisis
Princesses Beatrice and Eugenie Join Royal Family at Sandringham Christmas Service
Fine Wine Investors Find Little Cheer in Third Year of Falls
UK Mortgage Rates Edge Lower as Bank of England Base Rate Cut Filters Through Lending Market
U.S. Supermarket Gives Customers Free Groceries for Christmas After Computer Glitch
Air India ‘Finds’ a Plane That Vanished 13 Years Ago
Caviar and Foie Gras? China Is Becoming a Luxury Food Powerhouse
Hong Kong Climbs to Second Globally in 2025 Tourism Rankings Behind Bangkok
From Sunniest Year on Record to Terror Plots and Sports Triumphs: The UK’s Defining Stories of 2025
Greta Thunberg Released on Bail After Arrest at London Pro-Palestinian Demonstration
Banksy Unveils New Winter Mural in London Amid Festive Season Excitement
UK Households Face Rising Financial Strain as Tax Increases Bite and Growth Loses Momentum
UK Government Approves Universal Studios Theme Park in Bedford Poised to Rival Disneyland Paris
UK Gambling Shares Slide as Traders Respond to Steep Tax Rises and Sector Uncertainty
×