UK economy is in recession, threatening Sunak’s election: Britain’s economy slowed in the second half of 2023. This made things hard for Prime Minister Rishi Sunak, who has promised to boost growth before the election later this year.
GDP (gross domestic product) fell by a worse-than-expected 0.3% in the three months ending in December. Between July and September, it fell by 0.1%.
A poll of experts by Reuters predicted a smaller drop of 0.1% from October to December.
The value of the pound fell against the dollar and the euro. People who bet money on the Bank of England’s (BoE) cutting interest rates this year raised their bets. In a budget plan coming on March 6, businesses asked the government for more help.
A British Chambers of Commerce spokesman, Alex Veitch, said, “Businesses were already well aware of the problems they face, and this news will no doubt set off alarm bells for the government.”
“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.”
Mr. Hunt, the finance minister, said, “There are signs the British economy is turning a corner.” He also said, “We must stick to the plan—cutting taxes on work and business to build a stronger economy.”
According to the news, Hunt wanted to cut billions of pounds from planned public spending to pay for tax cuts in his budget before the election, but only if money was tight.
The Office for National Statistics (ONS) said the economy grew by 0.1% from 2022 to 2023. The BoE has said that it thinks output will rise slightly in 2024, but only by 0.25%.
Britons’ economy has stagnated for over two years, but recessions are decreasing as they mature.
Because of the COVID-19 pandemic, the economy shrank the most ever, by more than two quarters, in early 2020. A severe recession began in the second quarter of 2008 and ran just over a year, from the second quarter of 2009 to the second quarter of 2010.
Wednesday’s data showed that inflation stayed at a lower-than-expected 4.0% in January. This made investors talk again about a possible rate cut by the BoE as early as June. But Tuesday’s report of solid pay growth made it clear why the BoE is still being careful.
GDP fell more than in the first three months of 2021, when Britain imposed COVID-19 limitations.
The ONS said the economy shrank by 0.1% month-to-month in December after growing by 0.2% in November. A study by Reuters showed that the number would drop by 0.2% in December.
According to the ONS, the industrial, building, and wholesale sectors most likely caused the drop in GDP in the last three months of last year.
GDP per person has decreased every quarter of 2023 and hasn’t grown since the beginning of 2022. This is the longest stretch of no growth since records began in 1955.
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