The UK’s economy shrunk by 0.2 per cent between July and September, in what some experts say could be the start of the longest recession since record began.
The Office for National Statistics (ONS) said that gross domestic product (GDP) had fallen by 0.6 per cent in September, in part due to Queen Elizabeth’s funeral.
It added to a 0.2 per cent drop for the full quarter – lower than had been expected as the ONS revised its estimates for July and August.
GDP fell 0.2% in Quarter 3 (July to September) 2022 with:
▪️ services flat (0.0% growth)
▪️ manufacturing falling 2.3%
▪️ construction growing 0.6%
➡️ https://t.co/IsdBc7KmAM pic.twitter.com/lwcKVBUOOC— Office for National Statistics (ONS) (@ONS) November 11, 2022
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“With September showing a notable fall partly due to the effects of the additional bank holiday for the Queen’s funeral, overall the economy shrank slightly in the third quarter,” said ONS director of economic statistics Darren Morgan.
“The quarterly fall was driven by manufacturing, which saw widespread declines across most industries.
“Services were flat overall, but consumer-facing industries fared badly, with a notable fall in retail.”
It could be the beginning of a recession – which is defined as two quarters of shrinking GDP in a row.
The reading comes just a week after the Bank of England published a caveated forecast that the UK might be headed for an eight-quarter recession – the longest consecutive recession since reliable records began in the 1920s.
However, the Bank cautioned that this would only happen if it raises interest rates to around 5.2 per cent – which the market was expecting at the time.
It said it did not expect rates to reach such a high level, which would imply that the recession could be less drawn out.
The September figure was worse than expected – analysts had forecast a 0.5 per cent drop during the month, according to Pantheon Macroeconomics.
However, the ONS changed its readings for August and July, helping for the quarter as a whole. The economy was previously thought to have shrunk by 0.3 per cent in August but that was revised to 0.1 per cent.
In July the economy had previously thought to have risen by 0.1 per cent – the ONS changed that to 0.3 per cent.
The British finance minister Jeremy Hunt said: “We are not immune from the global challenge of high inflation and slow growth largely driven by Putin’s illegal war in Ukraine and his weaponisation of gas supplies.
“We are not immune from the global challenges of high inflation & slow growth largely driven by Putin’s illegal war in Ukraine and his weaponisation of gas supplies”.
Chancellor @Jeremy_Hunt responds to today’s GDP statistics from the @ONS. pic.twitter.com/me9Rt54f59— HM Treasury (@hmtreasury) November 11, 2022
“I am under no illusion that there is a tough road ahead – one which will require extremely difficult decisions to restore confidence and economic stability.
“But to achieve long-term sustainable growth, we need to grip inflation, balance the books and get debt falling. There is no other way.”
Shadow finance minister Rachel Reeves said the latest GDP figures were “extremely worrying”.
The Labour MP said: “Today’s numbers are another page of failure in the Tories’ record on growth, and the reality of this failure is family finances crunched, British businesses left behind and more anxiety for the future.
“We’re already set to be near the bottom of global league tables on growth, but all the Tories offer yet again is austerity.
“Britain has so much potential to grow. We have the talent. We have the capacity.”
