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Official statistics printed on Thursday confirmed the UK financial system slipped right into a technical recession within the second half of final yr.
The Workplace for Nationwide Statistics mentioned gross home product fell 0.3 per cent quarter on quarter within the final three months of 2023, following a 0.1 per cent fall within the earlier interval, confirming preliminary estimates.
Which means that the financial system contracted for 2 consecutive quarters, the definition of a technical recession, reflecting the influence of the price of dwelling disaster and excessive borrowing prices.
Liz McKeown of the ONS mentioned: “Our up to date set of GDP figures reveals quarterly development unrevised throughout 2023, with a bit development within the first quarter and small contractions within the latter half of the yr.”
The revised knowledge affords little cheer to Prime Minister Rishi Sunak, casting a shadow over his pledge to “develop the financial system”. The Conservative celebration trails Labour closely in opinion polls forward of the overall election anticipated within the autumn.
Chancellor Jeremy Hunt mentioned: “Final yr was robust as rates of interest needed to rise to deliver down inflation, however we are able to see our plan is working. Inflation has fallen decisively from over 11 per cent to three.4 per cent, the financial system grew in January and actual wages have elevated for eight months in a row.”
Labour’s shadow chancellor Rachel Reeves mentioned the prime minister ought to name an election: “Rishi Sunak has damaged his promise to develop the financial system and left Britain in recession with working folks paying the worth.”
The ONS final month printed GDP figures for January exhibiting the financial system returned to development with 0.2 per cent month-on-month growth. Different indicators, similar to retail gross sales, enterprise sentiment and mortgage approvals, all improved from final yr.
Philip Shaw, economist at funding financial institution Investec, calculated that even when output remained flat over February and March, the outcome could be a quarterly improve in GDP within the first quarter.
The detailed figures printed by the ONS on Thursday confirmed some constructive information for customers.
Actual family disposable earnings, the quantity out there to spend after taking inflation under consideration, grew 0.7 per cent within the ultimate three months of 2023 after barely rising within the earlier three months.
The family saving ratio — the proportion of earnings that’s saved — rose to 10.2 per cent within the ultimate quarter, from 10.1 within the earlier three months, and above the long-term common of seven per cent. It was helped by pension financial savings and social advantages.
Higher family funds might assist stimulate a restoration in each spending and total development. Economists anticipate the advance to proceed this yr as inflation declines and wages rise.
“We expect actual family disposable earnings will proceed to rise this yr on account of decrease inflation and the increase from additional cuts to nationwide insurance coverage tax introduced within the March Finances from April,” mentioned Ashley Webb, economist at Capital Economics
In distinction, the present account deficit widened to three.9 per cent of GDP within the ultimate three months of 2023 from 3 per cent within the earlier quarter due to a deteriorating commerce image. The deficit consists of the UK commerce stability and the web earnings from overseas funding and transfers, and is a measure of how a lot the financial system depends on the influx of overseas cash.
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