The UK's economy shrunk by 0.2% in the three months to September, in a move widely feared to be the start of a long recession. The Office for National Statistics (ONS) said that gross domestic product (GDP) had fallen by 0.6% in September, in part due to the Queen’s funeral.
It could be the beginning of a recession – which is defined as two quarters of shrinking GDP in a row. It 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.
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But the Bank itself cautioned that this would only happen if it raises interest rates to around 5.2% – which the market was expecting at the time. The Bank itself said it did not expect rates to reach such a high level, which would imply that the recession could be less drawn out.
Responding to the latest GDP figures, 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.
"While the world economy faces extreme turbulence, the fundamental resilience of the British economy is cause for optimism in the long run."
Shadow chancellor Rachel Reeves 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. Britain's unique exposure to economic shocks has been down to a Conservative-led decade of weak growth, low productivity and under-investment and widening inequality.
"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. Labour's Green Prosperity Plan, our modern industrial strategy, our plan to boost skills and our active partnership with business will get our economy firing on all cylinders."
The Federation of Small Businesses called the latest GDP figures 'dreadful news'. National chairman Martin McTague said: "Confirmation of a shrinking economy is dreadful news for small businesses that have been facing increasing recessionary pressures for months now.
"Lower levels of reserves and resources mean they are more vulnerable to downturns, and at a time when confidence is deteriorating in both consumers and businesses, the outlook for the UK economy is now very bleak indeed. The fall in GDP is one headline figure made up of countless bits of disappointing news for small businesses across the country – a new venue or premises they couldn't open, a contract which ended unexpectedly, a staff member they had to let go.
"Taken together, the impact on the economy is huge and the Government must demonstrate that it has grasped the scale of the issue."
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