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Britain has fallen into a technical recession.
About a year on from Rishi Sunak’s pledge to “grow the economy”, data released by the Office for National Statistics (ONS) shows that it contracted in the final three months of 2023.
UK Gross domestic product fell by 0.3% in the October-December quarter, the ONS said, a larger fall than expected.
All three major parts of the UK economy contracted in October-December, today’s GDP report shows.
The services sector, which makes up about three-quarters of the economy, declined by 0.2%.
Production, which includes manufacturing, suffered a 1% drop in output, while construction shrank by 1.3%.
While the economy has now decreased for two consecutive quarters, across 2023, GDP is estimated to have increased by 0.1% compared with 2022, the ONS said.
Net trade, household spending and government consumption all contracted in the final quarter of last year, helping to push the UK economy into a technical recession.
Household expenditure fell by 0.1% in real terms (adjusted for inflation) in Q4 2023, after a downwardly revised fall of 0.9% in Q3, as consumers cut back in the cost of living squeeze.
Export volumes fell by 2.9% in October-December, after a fall of 0.8% in July-September. The fall was driven by a 6% decline in services exports, which offset a 0.8% increase in goods exports.
Real government consumption expenditure fell by 0.3% because of lower activity in education and health.
The fall in health may reflect lower activity because of industrial action by NHS workers, the ONS said.
The chancellor, Jeremy Hunt, is pinning the blame for the recession on high interest rates – which the Bank of England has raised to a 16-year high of 5.25%.
He said: “High inflation is the single biggest barrier to growth, which is why halving it has been our top priority. While interest rates are high – so the Bank of England can bring inflation down – low growth is not a surprise.
“But there are signs the British economy is turning a corner; forecasters agree that growth will strengthen over the next few years, wages are rising faster than prices, mortgage rates are down and unemployment remains low. Although times are still tough for many families, we must stick to the plan – cutting taxes on work and business to build a stronger economy.”
This is Sunak’s recession, said Rachel Reeves, Labour’s shadow chancellor.
Reeves said that the news that the UK was now in a technical recession would be “deeply worrying” for families and businesses.
She said: “Rishi Sunak’s promise to grow the economy is now in tatters.
"The prime minister can no longer credibly claim that his plan is working or that he has turned the corner on more than 14 years of economic decline under the Conservatives that has left Britain worse off. This is Rishi Sunak’s recession and the news will be deeply worrying for families and business across Britain.
"It is time for a change. We need an election now to give the British people the chance to vote for a changed Labour party that has a long-term plan for more jobs, more investment and cheaper bills. Only Labour has a plan to get Britain’s future back.”
The agenda
• 10am GMT: eurozone trade balance for December
• 1pm GMT: the Bank of England policymaker Megan Greene holds fireside chat with Brian Coulton, the chief economist at Fitch Ratings
• 1.30pm GMT: US weekly jobless data
We’ll be tracking all the main events throughout the day ... |
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