UK recession – live: Reeves says Britain trapped in cycle of ‘decline’ as Sunak’s economy pledge ‘in tatters’

If the UK tipped into recession in December, it will add to Rishi Sunak’s woes as voters go to the polls in two parliamentary by-elections:

An associate professor at the London School of Economics says Brexit is costing the UK between £75bn and £125bn each year – the equivalent of 3 per cent to 5 per cent of GDP:

The UK has slipped into recession in a blow to Rishi Sunak and the economy.

The Office for National Statistics (ONS) revealed on Thursday that the UK economy has contracted for the second quarter in a row in the final three months of last year.

The gloomy official figures confirm a 0.3 per cent decline in gross domestic product (GDP) between October and December.

It follows a 0.1 per cent contraction in the previous three months, after a downward revision against the zero growth initially estimated.

A technical recession is defined by two or more quarters in a row of falling GDP.

The news deals a blow to the prime minister, who has promised to grow the economy as one of his five priorities.

Labour has said the prime minister’s promise to grow the economy is in “tatters” following the news this morning that the UK has slipped into recession, reports political correspondent Zoe Grunewald.

The shadow chancellor Rachel Reeves has responded to the latest figures showing that the UK economy has entered a technical recession: “Rishi Sunak’s promise to grow the economy is now in tatters.

“The prime minister can no longer credibly claim that his plan is working or that he has turned the corner on more than fourteen years of economic decline under the Conservatives that has left Britain worse off. This is Rishi Sunak’s recession and the news will be deeply worrying for families and business across Britain."

She added: “It is time for a change. We need an election now to give the British people the chance to vote for a changed Labour Party that has a long-term plan for more jobs, more investment and cheaper bills. Only Labour has a plan to get Britain’s future back.”

The Office for National Statistics (ONS) today confirmed a 0.3 per cent decline in gross domestic product (GDP) between October and December 2023.

• Services declined by 0.2 per cent
• Meanwhile, construction shrank by 1.3 per cent
• And production fell by 1 per cent

Mr Hunt has said low economic growth is “not a surprise”, but implored the country to “stick to the plan – cutting taxes on work and business to build a stronger economy” despite tough times for many families.

Reacting to the latest GDP figures the Chancellor said: “High inflation is the single biggest barrier to growth which is why halving it has been our top priority. While interest rates are high – so the Bank of England can bring inflation down – low growth is not a surprise.

“But there are signs the British economy is turning a corner; forecasters agree that growth will strengthen over the next few years, wages are rising faster than prices, mortgage rates are down and unemployment remains low.

“Although times are still tough for many families, we must stick to the plan – cutting taxes on work and business to build a stronger economy.”

The Liberal Democrats have blamed “years of Conservative chaos and a revolving door of Conservative chancellors” for what they call “Rishi’s recession” following this morning’s bleak news, reports political correspondent Zoe Grunewald.

Liberal democratic leader Ed Davey has said the Conservative government is responsible for the UK entering a technical recession: "Rishi's recession has savaged the British economy by decimating growth and leaving families to cope with spiraling prices. Years of Conservative chaos and a revolving door of Conservative Chancellors has culminated in economic turmoil.

"It's hardworking Brits forced to pick up the tab for this mess, through high food prices, tax hikes and skyrocketing mortgage bills.

He added: "This year the country will have the chance to kick out this incompetent and out of touch government once and for all."

A business interest group has said today’s news the UK has fallen into recession “brings to a close a pretty stagnant year for UK economic growth”.

Anna Leach, deputy chief economist at the Confederation of British Industry (CBI), said: “December’s GDP number suggests that the UK narrowly fell into a technical recession in the second half of the year. This brings to a close a pretty stagnant year for UK economic growth.

“The CBI’s most recent surveys suggest this year has started better than last year ended, with expectations for services and manufacturing in positive territory and the drag from higher interest rates expected to diminish.

“Better-than-expected real earnings growth will support consumers against the headwind of higher interest rates. But firms remain under pressure from higher borrowing costs, higher prices, weak demand and ongoing challenges recruiting the workers they need to grow and invest.

“There are multiple growth opportunities across the UK economy this year. As we head towards the Budget in March, we’re looking for action to support labour market participation and investment so that opportunities in high-growth industries like net zero can be fully realised.”

The UK’s latest GDP figures should be a “wake-up call” for ministers, a left-leaning think tank has said.

Pranesh Narayanan, research fellow at the Institute for Public Policy Research (IPPR), said: “This time last year, the Prime Minister pledged to get the economy growing but today’s data, showing a mild technical recession, shows a stark lack of progress.

“Chronic underinvestment in hospitals, schools, net zero and infrastructure has created a crumbling public realm and a broken economy.

“This should be a wake-up call that spurs the Government to prioritise public investment rather than irresponsible tax cuts. Let’s fix our problems now rather than storing them up for later.”