UK fell into technical recession in H2 2023
THE UK slipped into a shallow recession in the second half of 2023, undercutting Prime Minister Rishi Sunak’s claim to be growing the economy in the run-up to a general election.
Gross domestic product (GDP) fell 0.3 per cent in the fourth quarter, more than the 0.1 per cent drop economists forecast, Office for National Statistics (ONS) figures on Thursday (Feb 15) show. It followed an unrevised 0.1 per cent decline in the previous three months.
Economists define a technical recession as two straight quarters of falling output but the small scale of the declines suggest that the UK is in stagnation rather than a full-blown downturn. It could nonetheless increase pressure on the Bank of England (BOE) to cut interest rates from a 16-year high.
The pound slipped against the US dollar after the release. It traded as much as 0.1 per cent weaker at US$1.2548, set for a third day of losses.
The figures are likely to be used by the opposition to attack the ruling Conservative government’s handling of the economy ahead of a general election expected in the second half of 2024. They come on the day of two special elections in which the Tories are expected to suffer heavy losses, with the party around 20 percentage points behind Labour in national opinion polls.
Sunak made growing the economy one of five key pledges last year. However, the ONS figures show that the UK stagnated in his first full year as prime minister. Q4 GDP was down 0.2 per cent compared with a year earlier, and growth was just 0.1 per cent in 2023 as a whole.
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The UK economy has been hamstrung by the worst cost-of-living crisis in generations and a rapid rise in interest rates that squeezed borrowers. Industrial action in the rail and health sectors and a plunge in retail sales contributed to another fall in GDP in December.
BOE governor Andrew Bailey played down the significance of a technical recession this week, pointing to signs of an “upturn” in surveys covering the start of 2024.
Following release of the data, British finance minister Jeremy Hunt said that the economy was turning a corner and that forecasts pointed to stronger growth in the coming years.
“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,” Hunt said in a statement. “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.”
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