The British economy has formally slipped into recession after recording two successive quarters of negative economic growth in the second half of last year.
An official data today, February 15, showed that Gross domestic product shrank by 0.3 per cent in the fourth quarter of 2023 after contracting 0.1 per cent in the previous three months.
The Office for National Statistics (ONS) said, in a statement, that the statistics have qualified the country in meeting the technical definition of a recession.
Britain slid into recession last year on elevated inflation and a cost-of-living crisis, dealing a blow to Prime Minister Rishi Sunak before this year’s general election.
The ONS noted that all main sectors shrank in the fourth quarter, with manufacturing, construction and wholesale being the biggest drags on growth.
It added that the economy was broadly flat overall in 2023.
Prime Minister Sunak, whose governing Conservatives are trailing Keir Starmer’s main opposition Labour Party ahead of the election due this year, has pledged to grow the economy as one of his top five priorities.
News of the recession comes as voters go to the polls in two by-elections today, with the Conservatives fearful of losing one-time strongholds in Wellingborough, central England and Kingswood in the southwest.
Capital Economics analyst, Ruth Gregory said: “the news that the UK slipped into technical recession in 2023, will be a blow for the prime minister on a day when he faces the prospect of losing two by-elections.
“But this recession is as mild as they come and timely indicators suggest it is already nearing an end.”
Finance minister, Jeremy Hunt noted that stubborn inflation and high interest rates were behind the output fall, but insisted that the economy is “turning a corner.”
“While interest rates are high so that the Bank of England can bring inflation down, low growth is not a surprise.
“But 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.
“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.”
Confirmation of the recession comes one day after separate official data showed that UK inflation held at 4.0 per cent in January from December, or double the Bank of England’s target rate.
The January reading was better than market expectations of an increase to 4.2 per cent, but inflation nevertheless remains elevated, extending a cost-of-living crisis for millions of people in Britain.
Hunt added that bringing down elevated inflation remained the government’s “top” goal.
“High inflation is the single biggest barrier to growth which is why halving it has been our top priority,” he said.
But Labour slammed the government’s stewardship of the economy, adding that PM Sunak’s vow to deliver growth was in “tatters.”
“The prime minister can no longer credibly claim that his plan is working or that he has turned the corner on more than 14 years of economic decline under the Conservatives that has left Britain worse off,” said Labour finance spokeswoman Rachel Reeves.
“This is Rishi Sunak’s recession and the news will be deeply worrying for families and businesses across Britain.”
The BoE’s main interest rate sits at a 16-year high of 5.25 per cent, as it seeks to bring inflation back to its 2.0 per cent target.
However, rising interest rates also ramp up loan costs for individuals and businesses, further worsening the nation’s cost-of-living crunch.
Yet annual UK inflation has tumbled since striking a 41-year peak of 11.1 per cent in October 2022.
Global inflation soared as the invasion of Ukraine by major oil and gas producer Russia two years ago sent energy prices rocketing.
In response, the world’s major central banks helped to cool inflation by hiking borrowing costs.
According to BBC, the UK is considered in recession if GDP falls for two successive three-month periods or quarters.
The figures will be a blow to Prime Minister Rishi Sunak. Growing the economy was one of five pledges he made in January 2023.
