As GDP falls again, economic outlook for many businesses is 'daunting'
The mortgage industry has been reacting after the UK’s gross domestic product (GDP) fell by 0.2% in the third quarter of the year, according to latest data from the Office for National Statistics showed.
GDP also slid in September, falling by 0.6%, though estimates might have been affected by the bank holiday for the state funeral of Queen Elizabeth II, the ONS noted as some businesses closed or operated differently on that day.
In Q3, there was no growth in services output, a slowing from the 0.2% increase in the previous quarter. Services output showed a monthly fall of 0.6% in September.
Production output fell by 1.5% in Q3 - the fifth consecutive quarter that it has decreased. This latest quarterly fall in production output was driven mostly by a fall in manufacturing output of 2.3%. Construction output rose by 0.6% from July to September.
Meanwhile, expenditure fell by 0.2% in the third quarter, which was driven by a 0.5% fall in private consumption.
Read more: UK lending points to weakening economy, say experts.
Riz Malik, director of Southend-on-Sea-based R3 Mortgages, compared the UK’s current economic climate to that at the start of the COVID-19 pandemic lockdown.
“One major difference is that the Bank of England base rate was 30 times lower than it is at present,” Malik said. “Businesses that rely on discretionary spending will be hit first and the hardest.
“Those expecting any early Christmas presents from the Autumn Statement will be severely disappointed. As the economy worsens, if you are not using fiscal policy to stimulate demand in an economy, you have to use monetary policy. That is one reason I believe a prolonged high-interest rate environment may not be the new norm.
“The cynic inside me suggests we may see rate reductions the closer we get to a general election. Although the government does not set interest rates, its actions can lead to changes as we saw during the reign of the terrible two.”
Elliott Benson, mortgage broker at Leeds-based Sett Mortgage, shared that as a small business owner, the current state of the economy does make him feel uneasy.
“I am currently not seeing a reduction in demand, but I am seeing a shift in the kind of enquiries I am receiving from predominantly purchase to now many more remortgages,” Benson said.
“The main challenge currently is constantly adapting the business to ensure I am staying relevant in terms of the service I can offer to the changing needs of the current marketplace. I am remaining optimistic about the future and hopeful that the Autumn Statement will bring back some measure of confidence in the economy moving forward.”
Read more: Market outlook uncertain, warns chief economist.
Paul Holland, mortgage broker at Chatham-based Henchurch Lane Financial Services, said the economic outlook for, as most likely for many small businesses, was daunting.
“We’re very lucky as a brokerage to have experienced two of the busiest years in mortgage history when other businesses would have struggled as a result of multiple lockdowns and social distancing measures enforced throughout the pandemic,” Holland pointed out.
“The challenges we face going forward into 2023 are dealing with lots of difficult discussions when people come to the end of their very competitive fixed rates, along with reduced levels of new enquiries. We’ll be looking to pivot and diversify to cover ourselves as a business.
Holland said next week’s Autumn Statement was the most important budget announcement since he had been in the industry.
“I would urge the government to reflect on the sheer amount of damage the choices made in the mini budget had on the economy,” Holland added. “I’m confident they’ll learn from those errors and implement the kind of fiscal changes needed to restore confidence in the market.
“I think people are expecting tax increases and cutbacks and know this is essential to fix the broken economy in the long term.”
