UK economy slips into recession

The UK economy has fallen into recession for the first time since 2020, according to official figures. The Office for National Statistics (ONS) said that the gross domestic product (GDP), which measures the total value of goods and services produced in the country, shrank by 0.3% in the last three months of 2023. This followed a 0.1% decline in the previous quarter, meaning the UK has experienced two consecutive quarters of negative growth, the standard definition of a recession.

The ONS said that all the main sectors of the economy, such as services, production and construction, contracted in the fourth quarter of 2023. The biggest drags on growth were manufacturing, construction and wholesale, which were partially offset by increases in hotels and rentals of vehicles and machinery. The ONS also said that health and education performed less well than initially estimated in October and November, and both contracted in December. Retail and wholesale were the biggest overall downwards pulls on the economy in December, partially offset by growth in computer programming and manufacturing.

The recession will be a blow to Prime Minister Rishi Sunak, who pledged to grow the economy in January 2023, ahead of the general election. The UK economy has been struggling with high inflation, rising interest rates, supply chain disruptions, labour shortages and the impact of the coronavirus pandemic and Brexit. The government has been trying to balance the need to support businesses and households with the need to rein in public spending and borrowing. Chancellor Jeremy Hunt is expected to unveil his latest Budget on 6 March, amid speculation that he may announce tax cuts and spending cuts to improve the public finances.
The opposition Labour Party said that the recession showed that Mr Sunak’s pledge to grow the economy was “in tatters”. Shadow chancellor Rachel Reeves said: “This is Rishi Sunak’s recession and the news will be deeply worrying for families and business across Britain.” She accused the government of being “out of touch” and “out of ideas” and called for a “change of direction” to boost growth and living standards.

Some economists said that the recession was likely to be mild and short, and that the UK economy could bounce back in 2024, as inflation falls, interest rates stabilise, consumer confidence improves and global demand picks up. They also pointed out that the UK economy was still larger than it was before the pandemic, unlike some other countries. Ruth Gregory, deputy chief UK economist at Capital Economics, said: “We doubt the Bank of England will be too worried about what is likely to be a mild and short recession.” She added that the Bank may cut interest rates later this year to support the recovery.