UK heads for LONG RECESSION as economy shrinks by 0.2%
Britain’s economy shrank by 0.2% in the three months to September, in what is expected to be the beginning of a long recession.
In its first estimate of growth in the third quarter, the Office for National Statistics presented a bleak picture of the economy before next week’s autumn statement from the Chancellor, Jeremy Hunt.
The Bank of England expects the latest gross domestic product figures to be the start of a prolonged UK recession – as rising interest rates and the cost of living take their toll on activity – lasting until the end of next year. Another negative growth figure for the final three months of 2022 would confirm a technical recession.
The ONS said the performance of the economy in the three months to September had been affected by the extra bank holiday for the funeral of Queen Elizabeth II, which led to weaker activity.
The reading comes just a week after the Bank of England published a caveated forecast that the UK might be headed for an eight-quarter recession, the longest consecutive recession since reliable records began in the 1920s.
However, the Bank cautioned that this would only happen if it raises interest rates to around 5.2%, which the market was expecting at the time.
It said it did not expect rates to reach such a high level, which would imply that the recession could be less drawn out.
The September figure was worse than expected as analysts had forecast a 0.5% drop during the month, according to Pantheon Macroeconomics.
However, the ONS changed its readings for August and July, helping for the quarter as a whole.
The economy was previously thought to have shrunk by 0.3% in August but that was revised to 0.1%.
In July the economy had previously thought to have risen by 0.1%, the ONS changed that to 0.3%
Chancellor Jeremy Hunt said: “We are not immune from the global challenge of high inflation and slow growth largely driven by Putin’s illegal war in Ukraine and his weaponisation of gas supplies.
“I am under no illusion that there is a tough road ahead, one which will require extremely difficult decisions to restore confidence and economic stability.
“But to achieve long-term sustainable growth, we need to grip inflation, balance the books and get debt falling. There is no other way.”
Shadow chancellor Rachel Reeves said the latest GDP figures were 'extremely worrying'.
The Labour MP said: “Today’s numbers are another page of failure in the Tories’ record on growth, and the reality of this failure is family finances crunched, British businesses left behind and more anxiety for the future.
“We’re already set to be near the bottom of global league tables on growth, but all the Tories offer yet again is austerity.
“Britain has so much potential to grow. We have the talent. We have the capacity.”