The Office of National Statistics has released a report indicating a 0.3% contraction in Britain’s economy during the final quarter of 2023. The UK government had foreseen unfavorable GDP figures, and their concerns proved to be accurate. Ministers argue that some degree of discomfort was necessary to lower inflation, but experiencing a recession was never part of the five pledges.
According to the data unveiled on Thursday, Britain’s economic downturn marks its entry into recession, aligning with similar trends observed in Ireland, Denmark, the Netherlands, Austria, Sweden, and Norway. A technical recession is defined as two or more consecutive quarters of economic contraction.
Last year’s economic growth stood at a meager 0.1%, representing the weakest performance since the 2009 financial crisis, excluding the pandemic-affected year, as per the Office of National Statistics report.
UK gross domestic product (GDP) is estimated to have fallen by 0.3% in Quarter 4 (Oct to Dec) 2023, following an unrevised fall of 0.1% in the previous quarter. [Source: Office of National Statistics, UK]
From construction to manufacturing and retail, the economy faced its most significant cost-of-living crunch in decades. The implementation of higher interest rates, aimed at combating this crunch, adversely affected spending, profits, and output, thereby exacerbating the economic downturn.
Blame for Britain’s economic woes is largely directed towards the governing Conservative Party, including Prime Minister Rishi Sunak and Chancellor of the Exchequer Jeremy Hunt. The Labour Party has sharply criticized the economic record, describing it as “in tatters.”
Shadow Chancellor Rachel Reeves, a Labour Party member said that the state of the UK economy is the proof that Sunak’s government “is completely out of touch” with the realities people experience in real life. “A government that has for too long looked on economic failure with complacency—content to be the managers of decline. Rishi Sunak claims he has a plan, but the plan is not working.”
In the fourth quarter in terms of output, three main sectors saw significant declines including 0.2% in services, 1.0% in production, and 1.3% in construction, the report stated.
It has been suggested that this fall may not last that long considering that the UK jobs market and wage growth remain strong.
“Low growth is not a surprise,” said Hunt. “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.”
Hunt planned in his Spring budget to cut back on public spending in order to cut taxes, but in light of the report, he has less money available.
“But I would only cut taxes in a way that was responsible and I certainly wouldn’t do anything that fueled inflation just when we are starting to have some success in bringing down inflation,” said Hunt.
