The UK economy has officially entered a recession following two consecutive quarters of negative economic growth in the latter half of last year.
According to the Office for National Statistics (ONS), gross domestic product (GDP) contracted by a larger-than-anticipated 0.3% in the three months to December, following a 0.1% decline between July and September.
Expectations from a Reuters poll of economists had projected a more modest 0.1% decline in the October-to-December period.
This downturn in GDP for the fourth quarter marks the sharpest decline since the first quarter of 2021, as reported by the ONS.
Britain’s economy has been grappling with stagnation for nearly two years, with the Bank of England predicting a slight pickup in economic activity in 2024.
Alex Veitch, director of policy and insight at the British Chambers of Commerce, emphasized the challenges facing businesses and urged the government to outline a clear strategy for economic growth in the upcoming budget.
Finance minister Jeremy Hunt acknowledged the economic challenges but expressed optimism about signs of a potential turnaround. He emphasized the importance of adhering to existing economic plans, focusing on tax cuts to bolster the economy.
Reports have surfaced indicating that Hunt is considering substantial cuts to public spending to facilitate pre-election tax reductions in the budget scheduled for March 6, given the constraints of tight finances.
In terms of monthly performance, economic output decreased by 0.1% in December following a 0.2% expansion in November, according to the ONS. This outcome contrasts with expectations from the Reuters poll, which had anticipated a 0.2% decline in December.
The manufacturing, construction, and wholesale sectors were identified as the primary contributors to the GDP decline, according to the ONS. Following the release of the GDP data, the pound experienced moderate weakening against both the dollar and the euro.
