UK ‘may avoid recession’ until later this year after World Cup boost

There is ‘plenty of headroom’ in the economy, says Institute of Economic Affairs

Buoyant sales at bars during the tournament lifted the econony (PA)

Britain's economy unexpectedly grew in November after a boost from World Cup drinkers and early Christmas shoppers, reducing the chances it has already slipped into recession.

The Office for National Statistics (ONS) recorded an increase of 0.1 per cent as the services sector remained in growth despite the soaring cost of living. Analysts had predicted the economy would shrink by 0.3 per cent.

Experts at the ONS said the slight rise was supported by the technology sector and a strong showing by pubs and bars during a boost from the World Cup in Qatar, which began on 20 November.

It nevertheless represented a slowdown in growth after GDP increased by 0.5 per cent in October.

The slim growth means there will need to have been a sharp fall of around 0.5 per cent in output in December for Britain to record two straight quarters of falling GDP, the commonly used definition of recession in Europe.

“With a fair wind, the UK may now avoid recession, though December was marked by widespread strikes and activity survey readings were weak,” HSBC economist Liz Martins said.

It comes as inflation started to cool down in November, dropping to 10.7 per cent from a 41-year-high of 11.1 per cent a month earlier, and it is expected to drop further through 2023.

Julian Jessop, economics fellow at the Institute of Economic Affairs, said the overall picture was “generally reassuring”.

“It is only two weeks into 2023, but the gloomy consensus that the UK is now in the deepest and longest recession of any major economy has already started to unravel.

“The marginal 0.1 per cent rise in GDP in November, on top of the 0.5 per cent rebound in October, means that the UK probably avoided a second successive quarter of falling output in the final three months of last year.”

However, there is “little to cheer”, he added. “The bigger picture is that growth should be much stronger. GDP and total employment are still both lower than before the pandemic, so there is plenty of headroom.

“The ‘two successive quarters’ definition of recession is also arbitrary. Small changes either way in headline GDP mean nothing to the many households struggling to pay their bills.”

Jeremy Hunt, the chancellor, said: “We have a clear plan to halve inflation this year – an insidious hidden tax which has led to hikes in interest rates and mortgage costs, holding back growth here and around the world.”

But shadow chancellor Rachel Reeves said the GDP figures were “just another page in the book of failure that is the Tory record on growth”.

ONS director of economic statistics Darren Morgan said “telecommunications and computer programming” helped nudge the economy slightly into growth in November. “Pubs and bars also did well as people went out to watch World Cup games.

“This was partially offset by further falls in some manufacturing industries, including the often-erratic pharmaceutical industry, as well as falls in transport and postal, partially due to the impact of strikes.”

Kitty Ussher, chief economist at the Institute of Directors, said: “This is stronger activity than was expected for November and so will further contribute to the improvement in market sentiment we have seen in the last few weeks.”

Britain’s goods trade deficit widened to £15.6bn in November, slightly more than the £14.9bn forecast in a Reuters poll.