UK recession confirmed by gloomy GDP figures in blow for Rishi Sunak and economy

Martin McTague, national chairman of the Federation of Small Businesses (FSB), said news of the technical recession “will just confirm what many small firms have been saying for some time now – it’s very tough out there”.

He added: “Our research found that confidence among small firms has been in negative territory for seven straight quarters, due to the energy price crisis and the knock-on impact on the cost of doing business.

“There are big differences between sectors, with the hospitality sector recording by far the gloomiest confidence score, underlining that economic pain and strain are far from equally spread out.

“Small firms are grappling with high interest rates, energy costs much greater than they were a couple of years ago, and weak consumer demand. Two in five small firms said their revenues decreased over the final quarter of last year, with only a third saying they increased, showing that the shine has definitely come off the so-called ‘golden quarter’, to small firms’ detriment.

“The Government needs to foster an environment where small firms can grow, to the overall benefit of the economy, and to put this period of stagnation and shrinkage behind us once and for all.

“We have set out an ambitious but achievable programme for small business growth at the forthcoming Budget.”

All the main sectors fell on the quarter, the ONS director of economic statistics has said as she explained the latest figures.

Liz McKeown, ONS director of economic statistics, said: “Our initial estimate shows the UK economy contracted in the fourth quarter of 2023.

“While it has now shrunk for two consecutive quarters, across 2023 as a whole the economy has been broadly flat.

“All the main sectors fell on the quarter, with manufacturing, construction and wholesale being the biggest drags on growth.”

Britain’s economy slipped into a recession at the end of 2023 after output contracted by more than expected in the final three months, according to official figures.

The Office for National Statistics (ONS) estimated that gross domestic product (GDP) fell by 0.3% in the fourth quarter, following a decline of 0.1% in the previous three months.

It means that the economy entered a technical recession, as defined by two or more quarters in a row of falling GDP.

The UK’s latest GDP figures should be a “wake-up call” for ministers, a left-leaning think tank has said.

Pranesh Narayanan, research fellow at the Institute for Public Policy Research (IPPR), said: “This time last year, the Prime Minister pledged to get the economy growing but today’s data, showing a mild technical recession, shows a stark lack of progress.

“Chronic underinvestment in hospitals, schools, net zero and infrastructure has created a crumbling public realm and a broken economy.

“This should be a wake-up call that spurs the Government to prioritise public investment rather than irresponsible tax cuts. Let’s fix our problems now rather than storing them up for later.”

A business interest group has said today’s news the UK has fallen into recession “brings to a close a pretty stagnant year for UK economic growth”.

Anna Leach, deputy chief economist at the Confederation of British Industry (CBI), said: “December’s GDP number suggests that the UK narrowly fell into a technical recession in the second half of the year. This brings to a close a pretty stagnant year for UK economic growth.

“The CBI’s most recent surveys suggest this year has started better than last year ended, with expectations for services and manufacturing in positive territory and the drag from higher interest rates expected to diminish.

“Better-than-expected real earnings growth will support consumers against the headwind of higher interest rates. But firms remain under pressure from higher borrowing costs, higher prices, weak demand and ongoing challenges recruiting the workers they need to grow and invest.

“There are multiple growth opportunities across the UK economy this year. As we head towards the Budget in March, we’re looking for action to support labour market participation and investment so that opportunities in high-growth industries like net zero can be fully realised.”

The Liberal Democrats have blamed “years of Conservative chaos and a revolving door of Conservative chancellors” for what they call “Rishi’s recession” following this morning’s bleak news, reports political correspondent Zoe Grunewald.

Liberal democratic leader Ed Davey has said the Conservative government is responsible for the UK entering a technical recession: “Rishi’s recession has savaged the British economy by decimating growth and leaving families to cope with spiraling prices. Years of Conservative chaos and a revolving door of Conservative Chancellors has culminated in economic turmoil.

“It’s hardworking Brits forced to pick up the tab for this mess, through high food prices, tax hikes and skyrocketing mortgage bills.

He added: “This year the country will have the chance to kick out this incompetent and out of touch government once and for all.”

Mr Hunt has said low economic growth is “not a surprise”, but implored the country to “stick to the plan – cutting taxes on work and business to build a stronger economy” despite tough times for many families.

Reacting to the latest GDP figures the Chancellor said: “High inflation is the single biggest barrier to growth which is why halving it has been our top priority. While interest rates are high – so the Bank of England can bring inflation down – low growth is not a surprise.

“But there are signs the British economy is turning a corner; forecasters agree that growth will strengthen over the next few years, wages are rising faster than prices, mortgage rates are down and unemployment remains low.

“Although times are still tough for many families, we must stick to the plan – cutting taxes on work and business to build a stronger economy.”

The Office for National Statistics (ONS) today confirmed a 0.3 per cent decline in gross domestic product (GDP) between October and December 2023.

• Services declined by 0.2 per cent
• Meanwhile, construction shrank by 1.3 per cent
• And production fell by 1 per cent

Labour has said the prime minister’s promise to grow the economy is in “tatters” following the news this morning that the UK has slipped into recession, reports political correspondent Zoe Grunewald.

The shadow chancellor Rachel Reeves has responded to the latest figures showing that the UK economy has entered a technical recession: “Rishi Sunak’s promise to grow the economy is now in tatters.

“The prime minister can no longer credibly claim that his plan is working or that he has turned the corner on more than fourteen years of economic decline under the Conservatives that has left Britain worse off. This is Rishi Sunak’s recession and the news will be deeply worrying for families and business across Britain.”

She added: “It is time for a change. We need an election now to give the British people the chance to vote for a changed Labour Party that has a long-term plan for more jobs, more investment and cheaper bills. Only Labour has a plan to get Britain’s future back.”