UK on course for recession after economy shrinks in September
The UK may have entered what experts say could be the longest recession in a century as official statisticians said the economy shrank by 0.2% between July and September.
The Office for National Statistics (ONS) said gross domestic product (GDP) fell by 0.6% in September, in part due to the Queen’s funeral.
It added to a 0.2% drop for the full quarter – lower than had been expected as the ONS revised its estimates for July and August.
They are the biggest quarterly and monthly falls since early 2021 when the UK went back into lockdown to combat the Covid-19 virus, the ONS said.
If the economy also shrinks in the final three months of this year – as experts predict – it would push the economy into a recession that could last for two years.
It would also be the first time since 1975 that the UK has gone from one recession to another so quickly, economists at the Resolution Foundation said.
Research director James Smith said: “Falling consumer spending has caused the economy to shrink in the third quarter of 2022.
“This has set Britain on course for the quickest return to recession in nearly half a century.”
The ONS said that around half of that drop for September was due to the bank holiday on the day of the Queen’s funeral.
Bank holiday
Unlike most other bank holidays, there was no boost on that day for restaurants, pubs and tourist attractions as most businesses were closed, or reduced their opening hours.
ONS director of economic statistics Darren Morgan said: “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.
“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.”
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 warned that this would only happen if it raises interest rates to around 5.2% – which the market was expecting at the time.
It said it does 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% 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% in August but that was revised to 0.1%.
In July the economy had previously thought to have risen by 0.1% but the ONS changed that to 0.3%.
Global challenge
Chancellor Jeremy Hunt said: “We are not immune from the global challenge of high inflation and slow growth largely driven by (Vladimir) Putin’s illegal war in Ukraine and his weaponisation of gas supplies.
“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 chancellor Rachel Reeves said the latest GDP figures are “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.”
The Federation of Small Businesses said its members are particularly vulnerable to downturns in the economy.
National chairman Martin McTague said: “The fall in GDP is one headline figure made up of countless bits of disappointing news for small businesses across the country – a new venue or premises they couldn’t open, a contract which ended unexpectedly, a staff member they had to let go.”
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Given that there is so much evidence to show that applying Austerity and raising interest rates in a recession is the wrong policy combination, one wonders why the Tories go on doing it. One can only assume that they basically want to leave the next Government with a fatally crashed economy that will take years to re-build. Economic warfare against their own country. That’s what they call Patriotism in Tory circles.
On course? They’ve been saying that for months – we’re already in recession. It’ll be made worse by next week’s ‘mini budget’ (or whatever it’s called). Next year we need a GE and get this lot out.
you really think that will help?
Yes, the UK government is in disarray and out of ideas, lurching from one crisis to another. Next year we need a GE – we can’t have another two years of Tory austerity. As Labour are the only other option in our FPTP world – maybe they would do a better job. Ultimately, the only way we in Cymru can create a better future for our ourselves is through independence without Westminster interference.
This recession has been wholly manufactured by 10 Downing Street in cahoots with the Bank of England. Counter-productive policies (high interest rates, reduced liquidity, increased taxes) can only benefit the wealthy with lots of cheap assets becoming available as businesses go under and mortgages foreclose. Looks like class warfare, sounds like class warfare, don’t tell me it’s not class warfare! The argument for independence gets stronger every day under the neo-liberal regime of the Tories in Westminster. Unfortunately, the Labour Party appears almost as economically illiterate – no hope there. The challenge is for Plaid Cymru and the Greens to… Read more »
Hunt with a C is in Charge of the money this is the low life snake that started the destruction of the N H S to line it up to be sold off the ,man is SCUM
Well done Tories. Effed it up again! The reward for 12 years of Tory poverty for the workers and jam for the idle rich? ANOTHER 12 more years.