Today’s growth figures will have elicited a sigh of relief across the government. A meagre 0.1 per cent uptick is certainly better than a recession.
Though the news is not all good. The economy is smaller on a per capita terms, and when you dig down into the data, private sector activity is shrinking. An ominous warning sign for the year ahead.
This is hardly the turn of events hoped by Prime Minister Keir Starmer, who has undoubtedly made a faltering start on in addressing his self-declared top priority: economic growth.
This all goes back to last July. Just days after the election the government began emphasising fiscal ‘black hole’ inherited from the previous administration.
This political strategy backfired by creating fear among consumers, businesses, and investors – not helped by decisions to raise taxes to historic levels. Relations with business rapidly soured, jobs were cut, and the economy has stagnated.
Last month, the government attempted to turn the page on this chapter. But, according to the latest City AM / Freshwater Strategy Poll, the public isn’t buying what they are selling.
Just one-in-four (19 per cent) believe Starmer’s recent assertion that the economy is ‘starting to turn around’. In fact, a majority (55 per cent) say the UK economy will worsen over the next twelve months.
The business community may have welcomed several aspects of Chancellor Rachel Reeves’ recent growth reset speech, including Heathrow expansion, expedited infrastructure planning, and regulatory reform. Yet, the speech failed to shift public opinion.
Over two-thirds (71 per cent) say they are not confident in the government’s plan to achieve economic growth, and similar numbers (67 per cent) of Brits lack confidence in Reeves’ ability to manage the economy.
Despite Labour’s push for pro-growth policies, the lingering expectation of further tax hikes undoubtedly further undermines confidence.
The City AM / Freshwater Strategy Poll found that a majority expect income, corporate and employers’ national insurance to increase over the coming year.
They might be right, with Reeves refusing to rule out announcing further tax rises in the spring. This expectation alone could already be dampening spending and investment decisions, as the public and business once again brace for impact.
Then, there is the government’s focus on environmental goals. Labour’s election manifesto last year emphasised the ‘Green Prosperity Plan,’ putting the creation of Great British Energy and a raft of new green subsidies at the heart of their economic growth agenda.
They also very strongly prioritise economic growth (68 per cent) over protecting the environment (26 per cent). Similar numbers (70 per cent) say the UK should focus on economic growth rather than net zero.
This shows just how desperate voters are for the government to get growth going. Reeves herself acknowledged this feeling recently by saying she wanted the industry to “focus on getting things built, and stop worrying about the bats and the newts”.
The government faces a daunting challenge in convincing voters of its ability to drive economic growth.
Matthew Lesh is country manager (UK) at Freshwater Strategy