The UK's GDP fell for two consecutive quarters in the second half of 2023, pushing the economy into recession, according to the Office for National Statistics (ONS).
According to ONS data released on February 15th, UK GDP in the fourth quarter of 2023 fell by 0.3% compared to the previous quarter. In the third quarter of 2023, the economy contracted by 0.1%. Theoretically, the UK has entered a recession, having experienced two consecutive quarters of negative growth.
This decline was sharper than forecast and the largest since the beginning of 2021, the ONS said. Overall in 2023, UK GDP grew by 0.1% compared to 2022.
All three major sectors of the economy declined in the last quarter of last year, with services falling 0.2%; manufacturing and construction declining by 1% and 1.3%, respectively.
The UK economy has been stagnant for almost two years. Inflation in the UK is gradually slowing down but remains higher than other economies and the Bank of England's (BoE) 2% target. This has tightened household finances. The consumer price index (CPI) for the first month of 2024 rose 4% compared to the same period last year.
Buses and pedestrians on a street in London, England, on February 8. Photo: Reuters
Following the release of GDP figures, the pound sterling depreciated slightly against the USD and the Euro. "Businesses are no longer in the dark about the difficulties they face. This news will be a wake-up call for the government," said Alex Veitch, Director of Policy and Research at the British Chamber of Commerce and Industry. He suggested that in the coming weeks, British Prime Minister Rishi Sunak will have to present a clear strategy to help the economy and businesses revive growth.
Nevertheless, the Bank of England (BoE) predicts the situation will improve from this year. Finance Minister Jeremy Hunt said on February 15th that "there are many signs that Britain is approaching a turning point." He affirmed that officials are sticking to the tax cut strategy to build a stronger economy.
British media reports indicate that Hunt is seeking to cut billions of pounds in public spending to offset proposed tax cuts in the budget plan to be announced next month.
Marcus Brookes, Chief Investment Officer at Quilter Investors, also believes the recession in the UK will be "mild and not prolonged". "UK GDP contracted in Q4 2023 primarily due to persistently high inflation, a weakening labor market, and low productivity growth. However, weather conditions also played a role," he said.
Brookes believes these barriers are only temporary and are gradually disappearing. "In the next few months, inflation will come down, easing the pressure on British households and boosting consumer spending," he added.
Ha Thu (according to Reuters, CNBC)
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