Official figures from the Office for National Statistics have confirmed that the UK economy fell into recession in the last three months of 2022. Gross domestic product (GDP), which is a benchmark for economic activity, fell by 0.3%. This was worse than the expected 0.1% fall, having already experienced a 0.1% fall between July and September. The UK enters a technical recession if GDP falls for two consecutive quarters, which has been met.
Growing the economy was one of five pledges that Prime Minister Rishi Sunak made in January 2023. The Chancellor, Jeremy Hunt, will announce his latest budget later this month, which now poses a challenge with economic recovery. Mr Hunt stated that low growth was no surprise while the Bank of England battles to control inflation through interest rates. He added, however, that there were “signs the British economy is turning a corner”.
This recession challenges Mr Sunak’s growth pledge, as the shadow chancellor, Rachel Reeves, called it “Rishi Sunak’s recession”, warning it will worry families and businesses. Interest rates have remained at 5.25% since August last year, even though inflation has been at 4% in January. Ruth Gregory, deputy chief UK economist at Capital Economics, suggested that the recession would not overly worry the Bank of England but that the latest figures might prompt them to consider decreasing staggeringly high interest rates.
The overall growth of the economy for 2022 was just 0.1%, which could lead the Chancellor to consider implementing tax cuts to stimulate the country even though Treasury sources have confirmed that there will be a larger squeeze on public spending, which will impact the families and businesses that face additional financial challenges
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