The United Kingdom has slipped into recession, official figures showed Thursday, just months ahead of a general election, derailing Prime Minister Rishi Sunak’s pledge to generate economic growth.
Gross domestic product fell 0.3% in the final three months of 2023, following a 0.1% contraction in the July-to-September period, the Office for National Statistics said. A recession is commonly defined as two consecutive quarters of contraction.
“All the main sectors fell on the quarter, with manufacturing, construction and wholesale being the biggest drags on growth, partially offset by increases in hotels and rentals of vehicles and machinery,” ONS director of economic statistics Liz McKeown said in a statement.
“Across 2023 as a whole the economy has been broadly flat.”
The ONS estimates that UK GDP increased by 0.1% last year — the weakest growth since 2009 in the midst of a global financial crisis, if 2020, which was affected by the pandemic, is excluded. That follows growth of 4.3% in 2022.
A Reuters poll of economists had pointed to a smaller 0.1 percent fall in the October-to-December period.
The fall in GDP in the fourth quarter was the biggest since the first quarter of 2021, the ONS said.
Britain’s economy has been stagnating for nearly two years. The Bank of England has said it expects it to pick up slightly in 2024.
“Businesses were already under no illusion about the difficulties they face, and this news will no doubt ring alarm bells for government,” Alex Veitch, director of policy and insight at the British Chambers of Commerce, said.
“The chancellor must use his budget in just under three weeks’ time to set out a clear pathway for firms and the economy to grow.”
Finance minister Jeremy Hunt said there were “signs the British economy is turning a corner” and “we must stick to the plan – cutting taxes on work and business to build a stronger economy.”
Media reports said Mr Hunt was seeking to cut billions of pounds from public spending plans to fund pre-election tax cuts in his March 6 budget, if penned in by tight finances.
Economic output fell by 0.1 percent in monthly terms in December after 0.2 percent growth in November, the ONS said. The Reuters poll had pointed to a 0.2 percent fall in December.
Sterling weakened moderately against the dollar and the euro shortly after the GDP data release.
The ONS said the manufacturing, construction and wholesale sectors were the largest contributors to the decrease in GDP.
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