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Rishi Sunak suffered a hammer blow today as official figures showed the UK slid into recession at the end of last year – and Brits have been getting poorer for two years.
The economy declined by a worse-than-expected 0.3 per cent in the quarter from October to December, with every sector going into the red.
That followed a 0.1 per cent reduction in the previous three months – meeting the technical definition of a recession, which is two successive quarters of contraction.
The news is a major setback for the PM, who vowed to grow the economy as one of his five priorities last year.
And the detail of the statistics was even more grim, suggesting only eye-wateringly high levels of immigration have been keeping the economy afloat.
After the ONS adjusted for new population estimates, GDP per person has declined for a seventh consecutive quarter – thought to be the longest run since records began 1955. While UK plc grew marginally across the whole of 2023 – by 0.1 per cent – GDP per head was down by 0.7 per cent.
However, Chancellor Jeremy Hunt – who is due to deliver a crucial pre-election Budget within weeks – insisted that while times are ‘tough’ the country is already ‘turning a corner’.
The economy declined by a worse-than-expected 0.3 per cent in the quarter from October to December
That followed a 0.1 per cent reduction in the previous three months. A recession is defined as two successive quarters of contraction
Chancellor Jeremy Hunt is preparing to deliver a crucial Budget at the beginning of next month
Household consumption recovered somewhat in the final quarter of the year, but net trade slumped
Despite the UK just managing to grow overall during 2023, GDP per person fell dramatically – reflecting significant immigration increasing the population
Mr Hunt said: ‘High inflation is the single biggest barrier to growth which is why halving it has been our top priority. While interest rates are high – so 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.’
Although the size of the decline is not huge and there was a boost for the government yesterday with inflation holding steady, news that the UK is officially dropped into the red will be an unwelcome headache for Mr Hunt.
Opposition parties immediately seized on the figures to brand the downturn ‘Rishi’s recession’.
All three sectors saw falls in the fourth quarter, of 0.2 per cent in services output, 1 per cent in production, and 1.3 per cent in construction.
Worryingly December was the worst month of the three, with poor retail sales already having hinted at a grim period for businesses.
Across the whole of 2023 the UK barely made progress, growing by just 0.1 per cent – although that is in line with many comparable nations.
Bank of England governor Andrew Bailey has signalled that a recession is likely to be brief, telling a Lords committee yesterday that the UK economy was beginning to pick up.
The grim statistics could also accelerate moves to reduce interest rates, which Threadneedle Street is using to choke off activity in a bid to control inflation.
ONS Director of Economic Statistics Liz McKeown said: ‘Our initial estimate shows the UK economy contracted in the fourth quarter of 2023. While it has now shrunk for two consecutive quarters, across 2023 as a whole the economy has been broadly flat.
‘All the main sectors fell on the quarter, with manufacturing, construction and wholesale being the biggest drags on growth, partially offset by increases in hotels and rentals of vehicles and machinery.
‘The latest data showed that health and education performed less well than initially estimated in both October and November. Early indications suggest they both contracted in December.
The news is a setback for Rishi Sunak, who vowed to grow the economy as one of his five priorities last year
This chart shows how migration has changed over the years to reach a new high in 2022
There were some bright spots in the economy in the last half of 2023, but they were outweighed by negatives
‘Retail and wholesale were the biggest overall downwards pulls on the economy in December, partially offset by growth in computer programming and manufacturing.’
Shadow chancellor Rachel Reeves said: ‘Rishi Sunak’s promise to grow the economy is now 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 fourteen years of economic decline under the Conservatives that has left Britain worse off. This is Rishi Sunak’s recession and the news will be deeply worrying for families and business across Britain.
‘It is time for a change. We need an election now to give the British people the chance to vote for a changed Labour Party that has a long-term plan for more jobs, more investment and cheaper bills. Only Labour has a plan to get Britain’s future back.’
