Lyn Frans
Britain’s economy fell into a recession in the second half of 2023, a tough backdrop for Prime Minister Rishi Sunak who has promised to boost growth ahead of an expected 2024 election.
The Office for National Statistics (ONS) said that gross domestic product (GDP) contracted by a worse-than-expected 0.3 percent in the three months to December having shrunk by 0.1 percent between July and September.
A Reuters poll of economists had pointed to a smaller 0.1 percent fall in the October-to-December period. The fall in GDP in the fourth quarter was the biggest since the first quarter of 2021, the ONS said.
Britain’s economy has been stagnating for nearly two years. The Bank of England has said it expects it to pick up slightly in 2024.
“Businesses were already under no illusion about the difficulties they face, and this news will no doubt ring alarm bells for government,” Alex Veitch, director of policy and insight at the British Chambers of Commerce, said.
“The chancellor must use his budget in just under three weeks’ time to set out a clear pathway for firms and the economy to grow.”
Finance Minister Jeremy Hunt said there were “signs the British economy is turning a corner” and “we must stick to the plan – cutting taxes on work and business to build a stronger economy.”
Media reports said Mr Hunt was seeking to cut billions of pounds from public spending plans to fund pre-election tax cuts in his March 6 budget, if penned in by tight finances.
Economic output fell by 0.1 percent in monthly terms in December after 0.2 percent growth in November, the ONS said. The Reuters poll had pointed to a 0.2 percent fall in December.
Sterling weakened moderately against the dollar and the euro shortly after the GDP data release.
The ONS said the manufacturing, construction and wholesale sectors were the largest contributors to the decrease in GDP.
The Prime Minister Rishi Sunak, who is tasked to managing the economy even during a recession poses a significant challenge. He would be under pressure to implement effective fiscal policies to stimulate economic growth, support businesses, and protect jobs. Sunak’s ability to navigate the economic downturn and implement successful policies would be closely scrutinized, especially as it relates to his potential reelection prospects. A recession is typically characterized by a significant decline in economic activity, including GDP contraction, rising unemployment, and reduced consumer spending, this will definitely put pressure on the Prime Minister to immediately device strategies to stimulate economic growth.
The opposition parties would likely criticize the government’s handling of the economy and use the recession as a focal point in their election campaigns. They may argue that the government’s policies have contributed to the economic downturn and offer alternative solutions to address the recession.
Overall, a recession in the UK would create a challenging environment for policymakers, including Rishi Sunak, and could significantly impact the political landscape leading up to the next election.
Additional Source: Reuters.
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