London Daily

Focus on the big picture.
Monday, Mar 30, 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
Starmer Signals UK Crackdown on Addictive Social Media Features
Rising Costs Push One in Five UK Hospitality Businesses to the Brink of Closure
Man Arrested on Suspicion of Attempted Murder After Car Strikes Pedestrians in UK, Injuring Seven
Escalating Conflict Involving Iran Tightens Fiscal Pressures and Highlights UK Economic Vulnerabilities
UK Moves to Confront Russian ‘Shadow Fleet’ Operating in Its Waters
UK Housing Divide Deepens as Older Owners Hold Wealth While Under-30s Face Mounting Barriers
London Demonstration Calls on UK to Recognize Iranian Opposition’s Provisional Government
UK Green Party Vote on ‘Zionism is Racism’ Motion Collapses Amid Internal Disputes and Technical Failures
SNL UK Ignites Debate with Sharp Royal Satire Targeting Prince Andrew and Prince William
EU Proposes ‘Emergency Brake’ to Resolve Deadlock in UK Youth Mobility Talks
Thousands Rally in London to Oppose Rise of Far-Right Movements
Hong Kong Official Rejects Allegations of Surveillance Orders Targeting UK-Based Dissidents
PayPal Expands Cryptocurrency Services to Allow UK Users to Buy and Sell Bitcoin
UK Minister Challenges Reform Party’s ‘Pro-Family’ Agenda as Debate Intensifies
Concerns Grow Over Meningitis Risk Among UK Students Amid Warning Signs of New Outbreaks
Japanese Grand Prix 2026: Schedule, UK Start Times and Full Broadcast Details
Electric Vehicles Seen as Strategic Solution to UK Fuel Reserve Concerns
Rise of Lone-Actor Threats and Online Radicalisation Drives New Wave of Antisemitic Attacks in the UK
Canada Advances Plan to Ban Cryptocurrency Donations in Election Campaigns
UK Faces Looming Medicine Shortages as Iran Conflict Threatens Supply Chains
Deadly Meningitis Outbreak in the U.K. Highlights Urgent Need for Vaccination
Fresh Claims Emerge Over Harry and Meghan’s Australia Visit as Insider Speaks Out
NATO Assessment Indicates UK Defence Spending Has Fallen Below Alliance Average
FTSE 100 Slips as Middle East Tensions Weigh on Investor Sentiment
UK Economy Begins to Feel Early Impact of Iran Conflict as Policy Challenges Intensify
Russian National Jailed in UK After Assault Case Linked to Barron Trump’s Alert
Energy Price Surge Accelerates Shift Away from Fossil Fuels in UK Homes
UK Museums House More Than 260,000 Human Remains, New Report Reveals
Surging UK Gilt Yields Reflect Inflation Pressures and Fiscal Uncertainty
UK Issues Updated Guidance on Children’s Screen Time with Focus on Balance and Wellbeing
UK Migration Figures Show Shifting Trends Across Asylum, Visas and Channel Crossings
UK Watchdog Launches Probe into Five Firms Over Alleged Fake Reviews and Ratings
Jaguar Land Rover Halts Production at UK Plant Amid Supplier Disruption
UK Police Reverse Position, Confirm Arrests Will Resume for Palestine Action Protests
UK Small Businesses Face Europe’s Steepest Cost Pressures, New Survey Reveals
US Envoy Urges UK to Proceed with King’s Visit Amid Diplomatic Sensitivities
FTSE 100 Drops Over One Percent as Middle East Tensions Weigh on Markets
UK CO2 Plant Set to Reopen as Authorities Move to Safeguard Supplies Amid Middle East Tensions
Trump Urges Stronger Defence Investment as He Questions Allied Naval Capabilities
New COVID Variant Detected in UK Raises Concerns Over Vaccine Effectiveness
FTSE Russell Moves to Standardise Free-Float Rules for UK and International Listings
HBO Max Launches in UK and Ireland, Marking Major Step in Global Streaming Expansion
UK Signals Readiness to Seize Russian ‘Shadow Fleet’ Vessels in Escalation of Sanctions Enforcement
Escalating Middle East Conflict Seen as Major Threat to UK Economic Stability
Early Challenges Mark Prince Harry and Meghan’s Australia Visit
UK Government Rejects Cover-Up Claims After Theft of Former PM Aide’s Phone
Cyprus Opens Strategic Talks with UK Over Sovereign Base Areas
UK Faces Risk of Sharp Inflation Surge Despite Stable Pre-Crisis Figures
UK Police Arrest Two Over Suspected Antisemitic Arson as Iran Link Investigated
UK Inflation Holds at Three Percent Ahead of Oil Price Shock from Iran Conflict
×