Britain is in recession, according to official figures released Thursday, throwing another blow to embattled Prime Minister Rishi Sunak, whose Conservative party is poised to lose a general election later this year.
The Office for National Statistics (ONS) reported that gross domestic product fell by 0.3 percent in the fourth quarter of 2023, following a 0.1 percent contraction in the previous three months.
This places the economy in a recession, which is defined as two consecutive quarters of declining GDP.
While many projected that the recession would be brief, the data represents a significant blow for Sunak, who has made economic growth a top priority.
It comes as the Conservatives continue to behind the main opposition Labour Party in surveys.
Prior to the general election, electors will vote in two by-elections on Thursday, with the Conservatives concerned about losing one-time strongholds in Wellingborough, central England, and Kingswood, southwest.
‘Mild Recession’
“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,” said Capital Economics analyst Ruth Gregory.
“But this recession is as mild as they come and timely indicators suggest it is already nearing an end.”
In a broad-based downturn, all major sectors contracted in the fourth quarter, with manufacturing and construction being the most significant drags.
According to the ONS, the economy was largely flat last year, expanding by 0.1%, a dramatic drop from 4.6 percent in 2022.
The news came on the same day that Japan’s economy entered a recession.
“All told, it was a disappointing set of (British) GDP figures, but there’s no reason to panic just yet,” said Henry Cook, senior economist at MUFG Bank.
“The labor market is strong, with unemployment rates around record lows.
“Consumer confidence has gradually increased over the last 18 months. That does not scream ‘crisis’ in our thoughts.”
Finance Minister Jeremy Hunt argued that the economy was improving, despite the fact that inflation was at 4.0 percent, more than double the Bank of England’s target.
“High inflation is the single biggest barrier to growth,” Hunt stated after the GDP report was released.
“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,” Hunt said in a prepared statement.
Chancellor of the Exchequer Hunt is largely expected to reduce taxes in his budget next month, as a means of bridging the deficit with Labour.
However, with the Bank of England’s primary interest rate at a 16-year high of 5.25 percent, millions of voters face rising mortgage payments.
Sunak pledge ‘in tatters’
In response to Thursday’s data, Labour criticized the government’s economic management.
“This is Rishi Sunak’s recession, and the news will be deeply worrying for families and businesses across Britain,” said Labour’s finance spokeswoman Rachel Reeves, adding that his promise to provide growth was in “tatters”.
While UK inflation has fallen since its 41-year high of 11.1 percent in October 2022, energy and food prices remain high.