The UK fell into recession in the second half of last year as high interest rates and inflation put pressure on household and business finances, making it difficult for the ruling Conservatives to cope with the year electoral. Britain’s gross domestic product (GDP) fell 0.3% in the fourth quarter of last year, after falling 0.1% in the third, according to figures released by the Office for National Statistics on Thursday.
Two quarters of economic contraction in a row are generally considered by economists to be the definition of a so-called “technical” recession. Over the entire year 2023, the United Kingdom, however, still shows slight growth of 0.1% year-on-year, after growth of 4.3% in 2022, specifies the ONS. This is the worst performance “since the financial crisis of 2009, except 2020”, when the British economy was paralyzed for months because of the Covid-19 pandemic.
“Inflation is the biggest obstacle to growth, which is why dividing it in two has been our priority,” commented Finance Minister Jeremy Hunt. Inflation in the United Kingdom stands at 4%, still double the Bank of England’s target, but significantly reduced compared to its peak of 11% reached in October 2022.
“With high interest rates” – currently at 5.25% – so that the Bank of England can bring down inflation, “weak growth is not a surprise,” continues Jeremy Hunt. “But there are signs that the British economy has turned a corner and forecasters anticipate growth for the coming years,” he assures. “The announcement that the United Kingdom has entered a technical recession in 2023 will be a blow to Conservative Prime Minister Rishi Sunak on a day when he risks losing two local elections,” notes Ruth Gregory.
