The UK economy fell into recession in the second half of 2023, posing a major challenge for Prime Minister Rishi Sunak.
The British economy entered a recession in the last six months of 2023, a difficult situation before the anticipated election this year for Prime Minister Rishi Sunak who has vowed to increase growth.
Official data showed that gross domestic product (GDP) shrank by 0.3% in the quarter ending in December, after a 0.1% decline in the previous quarter.
The contraction in the fourth quarter was worse than the predictions of all economists in a Reuters survey, which expected a 0.1% drop. As a result of the bad economic performance, the pound lost value against the dollar and the euro.
Investors raised their expectations of the Bank of England (BoE) lowering interest rates this year and businesses asked for more support from the government in a budget plan due on March 6.
The data on Thursday means that Britain is in a recession along with Japan among the Group of Seven advanced economies, though it is likely to be brief and mild compared to historical norms. Canada has not yet published GDP data for the fourth quarter.
Britain’s economy is only 1% above its level of late 2019, before the COVID-19 pandemic hit – with only Germany performing worse among G7 countries.
Sunak pledged to boost the economy as one of his main promises to voters last year. His Conservative Party has been the dominant force in British politics for most of the past 70 years, with a reputation for economic management, but Labour is now more trusted with the economy, according to opinion polls, opens new tab.
Analysts have said that British households will see their first fall in living standards between one national election and the next since the Second World War.
Britain’s economy has been stagnant for almost two years.The COVID-19 pandemic caused the biggest slump on record over two quarters in early 2020 when the economy plunged by 22%.
Before that, the global financial crisis led to a severe recession that lasted for more than a year, from the second quarter of 2008 to the second quarter of 2009.
