London (Parliament Politics Magazine) – The United Kingdom slipped into a technical recession in the second half of last year after recording two consecutive quarters of negative economic growth, according to official figures.
The Office for National Statistics (ONS) reported on Thursday that Britain’s gross domestic product (GDP) contracted by 0.3 percent in the last three months of 2023, following a 0.1 percent decline in the third quarter. A technical recession is defined as back-to-back quarters of contracting GDP.
Following the release of the GDP data, the British pound weakened slightly against the US dollar and the euro.
The ONS noted that the GDP decline in the fourth quarter of 2023 was the largest since the first quarter of 2021. A Reuters poll of economists had predicted a smaller 0.1 percent fall for the October-to-December period. In monthly terms, economic output decreased by 0.1 percent in December after a 0.2 percent increase in November, against a predicted 0.2 percent fall for December.
Britain’s economy has stagnated for nearly two years, with the Bank of England expecting a slight recovery in 2024. However, slow growth this year presents a challenge for Prime Minister Rishi Sunak as he seeks to win voter support ahead of a national election expected later in 2024.
“Businesses were already aware of the difficulties they face, and this news will no doubt raise concerns for the government,” said Alex Veitch, director of policy and insight at the British Chambers of Commerce. “The chancellor must use his budget in just under three weeks to outline a clear path for economic growth.”
Finance Minister Jeremy Hunt stated that there were “signs the British economy is turning a corner” and emphasized the need to “stick to the plan – cutting taxes on work and business to build a stronger economy.”
Media reports indicate that Hunt is considering cutting billions of pounds from public spending to fund pre-election tax cuts in his March 6 budget, constrained by tight finances.
“This time last year, the prime minister pledged to get the economy growing, but today’s data, showing a mild technical recession, reveals a stark lack of progress,” said Pranesh Narayanan, research fellow at the Institute for Public Policy Research. He added that chronic underinvestment in hospitals, schools, and infrastructure has led to “a crumbling public realm and a broken economy,” urging the government to prioritize public investment over tax cuts.