UK recession – live: Reeves says Britain trapped in cycle of ‘decline’ as Sunak’s economy pledge ‘in tatters’
Figures confirm 0.3 per cent decline in bigger-than-expected year-end contraction
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Your support makes all the difference.Britain is trapped in a cycle of decline and Rishi Sunak’s pledges to boost the economy are now “in tatters”, Labour’s shadow chancellor Rachel Reeves has warned, as the UK fell into recession.
The Office for National Statistics (ONS) revealed on Thursday a 0.3 per cent decline in gross domestic product (GDP) between October and December 2023.
The gloomy official figures mean the economy entered a technical recession, as defined by two or more quarters in a row of falling GDP, for the first time since amid the pandemic in the first half of 2020.
The news deals a blow to the prime minister, who has promised to grow the economy as one of his five priorities, especially after most economists were only forecasting a 0.1 per cent decline in GDP.
In comments Labour suggested were “out of touch”, chancellor Jeremy Hunt said low economic growth is “not a surprise”, but added that the UK must “stick to the plan – cutting taxes on work and business to build a stronger economy” despite tough times for many families.
Last time UK entered recession was during first Covid lockdown
The new figures mark the first time the UK has entered recession since the first half of 2020, when the initial Covid lockdown sent the economy plunging into reverse.
Economists said the recession is likely to be short-lived, with GDP expected to pick up from the start of 2024.
But the figures are damning for prime minister Rishi Sunak, who has vowed to grow the economy as one of his five priorities.
Japan loses title of world’s third-largest economy with unexpected slip into recession
Germany has overtaken Japan as the world’s third-largest economy after the latter unexpectedly slipped into recession, as it struggles with a weak yen and an ageing population.
Japan’s GDP fell an annualised 0.4 per cent in the quarter to December after a 3.3 per cent slump in the previous quarter, government data showed on Thursday, confounding market forecasts for a 1.4 per cent increase.
When not adjusting for inflation, Japan’s nominal GDP stood at $4.21trn in 2023, falling below $4.46trn for Germany to rank as the world’s fourth largest economy, the data showed, more than a decade after falling behind China.
The recession raises questions over whether Japan will further delay a much-anticipated decision to raise the cost of borrowing, after a decade of ultra-loose monetary policy, having brought in a negative interest rate in 2016 in a bid to boost spending and investment, but which has weakened the yen.
‘Overly dramatic to label economic decline a recession,’ says economist
Economist Samuel Tombs from Pantheon Macroeconomics insists it is “overly dramatic to label the decline in economic activity in the second half of 2023 a recession, given that employment continued to rise, real wages rebounded and measures of business and consumer confidence returned to levels consistent with rising activity by the end of the year.”
He said there was also a good chance that revisions to economic data by the ONS may see the recession avoided in the end.
He said: “We expect quarter-on-quarter growth in gross domestic product to average 0.3 per cent in 2024, driven by a pick-up in households’ real expenditure.
“The [Bank of England’s] Monetary Policy Committee, therefore, needn’t panic that the economy weakened at the end of last year and can proceed with its plans to cut Bank Rate only gradually this year.”
Sunak presiding over longest unbroken record of financial decline for families since records began – Labour
Rishi Sunak has presided over the longest unbroken record of financial decline for families since records began, Labour’s shadow chief secretary to the Treasury has claimed.
“Given that Rishi Sunak promised the economy would be growing, the fact we are now in recession shows that his plan has failed, and the Conservative Party has run out of ideas for turning it around,” Darren Jones told Times Radio.
“But if you look under the bonnet of these datasets this morning, you’ll see that GDP per head has been declining quarter-on-quarter across the whole of the last year.”
“So people in their family finances have been feeling a huge pinch for the last year to 18 months, which as I understand is the longest unbroken record in family financial decline since the 1950s when records began,” he added.
Full report: Labour says Sunak’s promise to grow economy ‘in tatters’ as UK slips into recession
Labour’s shadow chancellor Rachel Reeves has lambasted the government as the UK economy has officially entered a technical recession.
Labour said the announcement shows the prime minister can “no longer credibly claim that his plan is working”, and that “Rishi Sunak’s promise to grow the economy is now in tatters”.
Our political correspondent Zoe Grunewald has the full reporthis morning’s developments:
Labour says Sunak’s promise to grow economy ‘in tatters’ as UK slips into recession
The UK’s latest economic woes come just as voters in Kingswood and Wellingborough take to the polls
Pound falls in wake of new economy figures
The pound fell after figures showed the UK fell into recession, following a weaker-than-forecast contraction in the final three months of 2023.
Sterling was 0.1 per cent down at $1.26, and was also 0.1 per cent lower at €1.17.
Case for Bank of England to cut base rate now even stronger, says economist
Chancellor Jeremy Hunt still has room to pursue tax cuts, while the case for an early cut to the Bank of England’s base interest rate is now even stronger, a right-wing think-tank has insisted.
“There are plenty of excuses for the weak GDP data – many other countries have also slipped into recession, the numbers may be revised, and leading indicators are already improving, said Julian Jessop, of the Institute of Economic Affairs.
“But the news is bad enough that it should have some implications for policy too.
“In particular, the Bank of England expected the economy to be flat in the fourth quarter of last year. On top of a downward revision to GDP in the first quarter, this means that the economy is already 0.4% smaller than assumed in the February Monetary Policy Report.
“The MPC’s job is to worry about inflation, not growth, but the case for early rate cuts is now even stronger.
“There will also be more pressure on Jeremy Hunt to cut taxes in the spring budget. The chancellor needs to be careful here. There is already some additional stimulus from the cuts in National Insurance in January and from the increases in pensions, benefits and the national minimum wage in April.”
Mr Jessop warned that the increase in interest rates was a “key driver of the slump into recession” and urged the chancellor to avoid reigniting inflation, adding: “But there is room for some well-targeted tax cuts that would both support demand and boost the productive potential of the economy.”
Watch: Hunt insists Tory party ‘must stick to our guns’ as UK falls into recession
Rachel Reeves: ‘You don’t need a recession to bring down inflation'
You don’t need a recession to bring down inflation, shadow chancellor Rachel Reeves has said.
Ms Reeves said: “I don’t buy this argument that you need to have a recession to get inflation down, other countries are doing an awful lot better at controlling inflation whilst also managing to grow their economy, which is the point that I made about Britain being acutely exposed to the challenges that we face.
“I just do not accept this premise that this was what was needed to control inflation.”
UK is trapped in cycle of decline, warns Rachel Reeves
Rachel Reeves has used a press conference to says today’s ONS figures are “deeply worrying news for families trying to make ends meet” and that the UK is trapped in a cycle of “decline”.
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