The growth of the private sector in the UK has stagnated and may be on the brink of recession. Although the UK economy achieved a 0.1% growth in November after several consecutive months of decline, this weak growth was mainly attributed to underlying effects and government spending on health. Specifically, the service sector, the largest economic sector in the UK, contributed only 0.1% of the growth. However, the three-month cumulative output growth of the service industry is zero, which analysts believe indicates that even if there is growth in the short term, it has not been able to restore vitality in the long run.

According to data from the Office for National Statistics (ONS) in the UK, the best performance of the service industry comes from the health sector. Sam Hill, Head of Market Insights at Lloyds Bank, stated that this growth is mainly due to the increased output caused by the recent absence of doctors on strike. In other words, this does not mean there is long-term economic recovery potential. It's difficult to maintain optimism about the economic outlook, "he said.

In addition, despite the impact of the flu peak and a decrease in school attendance, the education sector unexpectedly rebounded. At the same time, the healthcare sector has also recovered from its previous weakness, driven by specific diagnostic and treatment needs, particularly the increase in general practitioner (GP) appointments. Rob Wood, Chief UK Economist at Pantheon Macroeconomics, pointed out that overall, these growth events are driven more by underlying effects and government spending rather than a genuine recovery in the private sector. Therefore, the private sector in the UK is actually experiencing a recession.

The UK economy has come to a standstill, "said Ben Perks, Managing Director of Orchard Financial Advisers. The data only shows a small increase, but the real growth is not felt on the streets. The government needs to take urgent action to promote economic development. The UK government's initiatives, including a £ 40 billion increase in national insurance tax, an inflation resistant minimum wage increase, new regulations, and the release of negative information about government self selected fiscal policies, have all had a profound impact on the economy.

Rakesh Dua, CEO of DUA Accounting and Business Consulting, said, "The current government policies have completely depressed the mood of the business community. I have talked to many business owners and they are asking themselves why they are taking risks, why they are continuing to hire employees, why they are investing, why they have to bear more fixed costs because there is no growth to speak of. Business owners are also considering whether clients will accept further price increases

The UK Board of Directors (IoD) has pointed out that disappointing growth data has opened the door to "stagflation concerns". The IoD's economic confidence index reached its lowest point since the pandemic in November, and many business leaders were shocked by "worse than expected budgets".

Hill stated that recent employment indicators have not brought hope for economic recovery. He believes that these growth data further indicate that the economy is in a stagnant state, and it is expected that the growth in December will need to recover to a monthly growth level of 0.25% in order to maintain stable GDP growth in the fourth quarter. However, considering the growth rates of -0.1%, -0.1%, and 0.1% in the past three months, this greatly increases the risk of negative economic growth in the fourth quarter.

For British business owners, the possibility of negative growth is not surprising. The growth in November was minimal, and the actual growth during the quarter was zero, which is not surprising, "said David Belle, founder of Fink Money." I don't see any policies that can provide stimulus for the country

Analyst interpretation:

The difficulties in the UK economy and concerns about stagflation have had an impact on market sentiment, which in turn has affected the trend of the pound. Considering the long-term stagnation of the UK economy, the market may adopt a cautious attitude towards future monetary policy and economic growth prospects, which exacerbates downward pressure on the pound.

Recently, the trend of the pound against the US dollar has shown a clear weakness. The performance of the pound against the US dollar has been unstable since the beginning of the year, especially under the influence of slowing economic growth in the UK and global risk factors, which have put significant selling pressure on the pound. Recent technical charts show that the pound has fallen below several key support levels against the US dollar, and is expected to continue facing downward pressure in the short term amid further economic uncertainty.

conclusion

Overall, the UK economy is facing the challenge of stagnant growth. Although the temporary recovery in government spending and the health sector has brought some growth, overall, the decline of the private sector and the growing economic uncertainty have made the economic outlook bleak. The sluggish sentiment in the business community and the failure of government policies to effectively stimulate the economy have led to sustained downward pressure on the pound.