The UK economy contracted in the third quarter, marking the start of what is expected to be a protracted recession.
Gross domestic product fell 0.2 per cent, meaning Britain is the only economy in the Group of Seven not yet to fully recover from the pandemic, with output down 0.4 per cent from pre-Covid levels.
In September alone, GDP fell 0.6 percent due to an extra holiday for Queen Elizabeth II’s funeral and the national mourning that followed. It was the second consecutive month of contraction.
Chancellor Jeremy Hunt said: “I have no illusions that a tough road lies ahead -” one that will require extremely difficult decisions to restore confidence and economic stability. But to achieve long-term, sustainable growth, we need to get inflation under control, balance the books and drop the debt, there is no other way.”
Both consumer spending and business investment declined during the quarter, the Bureau for National Statistics said.
Two grim years lie ahead for households and businesses as the Bank of England and the government tighten the cost of living even further while tightening monetary policy. The risk is that an overly hawkish stance will make the coming recession worse.
The BOE, which has hiked interest rates eight times since December, says a recession is the inevitable price of bringing double-digit inflation under control. The slump could last until mid-2024 under a BOE scenario, making it the longest since 1920.
Prime Minister Rishi Sunak is preparing to announce tens of billions of pounds of tax hikes and spending cuts next week in a bid to plug a hole in public finances and restore credibility in the wake of market turmoil sparked by tax cuts proposed by his predecessor Liz Truss became.
How well the economy holds up will depend on people’s willingness to spend more of their income and an estimated $200 billion.
The contraction in GDP was less than 0.5 percent economists had expected, reflecting upward revisions to manufacturing in July and August.
https://www.independent.ie/business/world/uk-economy-shrinks-in-third-quarter-heralding-start-of-protracted-recession-42136017.html The UK economy shrinks in the third quarter, heralding the start of a protracted recession