22 December 2023 , 07:48
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The UK has moved closer to falling into recession after revised figures showed the economy performed worse than previously thought.
Gross domestic product (GDP) - which is a measure of the size and health of the economy - has been downgraded for the three months from July to September. New figures released today by the Office for National Statistics (ONS) show GDP contracted by 0.1% - previous estimates shown it had been flat.
A recession is defined as two consecutive quarters - so two three-month periods - of negative growth. The UK will officially be in recession if the final data for October to December 2023 shows the economy has contracted.
This data will be released by the ONS next year. Earlier this month, the ONS said the economy was estimated to have shrank by 0.3% during October.
The latest figures released today also showed there was zero growth between April and June, after GDP was first thought to have increased by 0.2%. Labour shadow chancellor Rachel Reeves said the revised GDP figures show Prime Minister Rishi Sunak has failed to meet his promise to “grow the economy”.
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She said: “Rishi Sunak is a Prime Minister whose legacy is one of failure. He failed to beat Liz Truss, he failed to cut waiting lists, he failed to stop the boats and now he has failed to grow the economy. Thirteen years of economic failure under the Conservatives have left working people worse off with higher bills, higher mortgages and higher prices in the shops.”
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Chancellor Jeremy Hunt said, "The medium-term outlook for the UK economy is far more optimistic than these numbers suggest. We've seen inflation fall again this week, and the OBR [Office for Budget Responsibility] expects the measures in the Autumn Statement, including the largest business tax cut in modern British history and tax cuts for 29 million working people, will deliver the largest boost to potential growth on record."
Asked whether he was concerned about the risk of a recession, Rishi Sunak later told reporters: "Compared to the predictions at the beginning of the year, the economy has done better and we've actually grown faster than our European neighbours like Germany, for example.
"But of course, we want to see more growth and that's why in the autumn statement a few weeks ago, the Chancellor cut taxes for businesses that are investing to help drive our future growth and the independent experts have said that that will do exactly that.
"But also because we've done a good job having inflation, we're able to now cut taxes for families, and that tax cut is significant.It's a cut in the rate of national insurance from 12% to 10%. And it's kicking in in just a couple of weeks in January, and that will help put more money in the pockets of families up and down the country."
Darren Morgan, director of economic statistics at the ONS, said GDP was downgraded for July to September as regular monthly business survey and VAT returns showed less spending. He explained: “The latest data from both our regular monthly business survey and VAT returns show the economy performed slightly less well in the last two quarters than our initial estimates. The broader picture, though, remains one of an economy that has been little changed over the last year.
“The latest VAT data, which takes a little time to receive and process means we now estimate the economy showed no growth in the second quarter, with weaker performances from smaller businesses, particularly those in both hospitality and IT than first shown. We also now estimate the economy contracted slightly in the third quarter, when we previously reported no growth, with later returns from our business survey showing film production, engineering & design and telecommunications all performing a little worse than we initially thought."