The United Kingdom has officially entered a recession, marking the first time since the pandemic that the economy has shrunk for two consecutive quarters. According to the latest statistics, the economy contracted by 0.3% in the last quarter of 2023, following a 0.1% decline in the previous quarter. A recession is defined by two consecutive three-month periods of economic decline.
The downturn is attributed to various factors, including reduced consumer spending due to high inflation and rising interest rates, which have greatly affected households and businesses. The Bank of England had raised interest rates several times in an attempt to curb inflation, but this has also made borrowing more expensive, putting further pressure on growth.
Chancellor Jeremy Hunt stated that while the figures confirm a technical recession, the economic outlook is expected to improve in the coming months as inflation slows and wages begin to outpace prices. He emphasized the government’s focus on long-term growth and support for households during difficult times.
Despite the contraction, the Office for National Statistics mentioned that the decline is relatively mild and does not yet suggest a severe recession. Sectors like construction and manufacturing saw limited growth, but retail and hospitality were significantly affected.
Economists believe the current drop in the economy may be short-lived, with improvements expected later in 2024 as financial conditions ease and global market stability returns. However, concerns remain over the potential impact on employment and continued high living costs.
