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

Britain’s economy slipped into a recession at the end of 2023 after output contracted by more than expected in the final three months, according to official figures.

The Office for National Statistics (ONS) estimated that gross domestic product (GDP) fell by 0.3% in the fourth quarter, following a decline of 0.1% in the previous three months.

It means that the economy entered a technical recession, as defined by two or more quarters in a row of falling GDP.

Holly Williams reports:

All the main sectors fell on the quarter, the ONS director of economic statistics has said as she explained the latest figures.

Liz McKeown, ONS director of economic statistics, said: “Our initial estimate shows the UK economy contracted in the fourth quarter of 2023.

“While it has now shrunk for two consecutive quarters, across 2023 as a whole the economy has been broadly flat.

“All the main sectors fell on the quarter, with manufacturing, construction and wholesale being the biggest drags on growth.”

Martin McTague, national chairman of the Federation of Small Businesses (FSB), said news of the technical recession “will just confirm what many small firms have been saying for some time now – it’s very tough out there”.

He added: “Our research found that confidence among small firms has been in negative territory for seven straight quarters, due to the energy price crisis and the knock-on impact on the cost of doing business.

“There are big differences between sectors, with the hospitality sector recording by far the gloomiest confidence score, underlining that economic pain and strain are far from equally spread out.

“Small firms are grappling with high interest rates, energy costs much greater than they were a couple of years ago, and weak consumer demand. Two in five small firms said their revenues decreased over the final quarter of last year, with only a third saying they increased, showing that the shine has definitely come off the so-called ‘golden quarter’, to small firms’ detriment.

“The Government needs to foster an environment where small firms can grow, to the overall benefit of the economy, and to put this period of stagnation and shrinkage behind us once and for all.

“We have set out an ambitious but achievable programme for small business growth at the forthcoming Budget.”

The Trade Union Congress’ General Secretary Paul Nowak has today said that the UK economy is in “dire straits” after “years of Tory stagnation”.

He added: “The Conservatives’ economic failures are hitting jobs and living standards. With household budgets at breaking point, spending is down and the economy is shrinking. At the same time our crumbling public services are starved of much-needed funding.

“After being in power for 14 years, the Tories have driven our economy into a ditch and have no idea how to get out.

"It’s time for a government with a serious long-term plan and strategy for renewal, to revive our economy and sustain growth into future.”

Joseph Rowntree Foundation chief economist Alfie Stirling said: “Today’s news that the economy entered a technical recession is concerning, but it will not be front of mind for the millions already in unjustifiable hardship.

“Fridges are either off or empty as already eye-watering food prices continue to rise. Loan and mortgage repayments are being missed as elevated interest rates crush family finances. And jobs are increasingly at risk as the labour market continues to deteriorate.

“Just weeks before the Budget, addressing this crisis of economic security, from individual families to the nation as a whole, must be the first priority for policymakers. This starts with reforming Universal Credit to reflect the actual cost of essentials, and a revitalisation of key services across care, housing, and job support.

“There is no quick fix. Business investment may be the lifeblood of a growing economy, but social security and public services provide the heartbeat.”

Labour suggested Jeremy Hunt’s comments on the UK entering technical recession meant the Chancellor was “out of touch”.

A spokesperson for the Labour Party said: “Jeremy Hunt’s comments are as insulting as they are out of touch.

“The Conservatives’ failure to take any responsibility for Rishi’s recession show why we need an election.”

Chancellor Jeremy Hunt said low economic growth is “not a surprise”, but added that the UK must “stick to the plan – cutting taxes on work and business to build a stronger economy” despite tough times for many families.

Jeremy Hunt has insisted it is the “right thing to do” to prioritise tackling inflation, after the UK slid into technical recession.

The chancellor told broadcasters: “We always expected growth to be weaker while we prioritised tackling inflation, that means higher interest rates, and that is the right thing to do because you can’t have long-term healthy growth with high inflation.

“But also for families when there is a cost-of-living crisis, when the cost of their weekly shop is going up, their energy bills are much higher, it is the right thing to do.

“The underlying picture here is an economy that is more resilient than most people predicted, inflation is coming down, real wages have been going up now for six months.

“If we stick to our guns, independent forecasters say that by the early summer we could start to see interest rates falling and that will be a very important relief for families with mortgages.”

Britain is a “stagnation nation”, with a growing population hiding the impacts of recession, a think tank has warned.

“Britain has fallen into recession, and a far deeper living standards downturn. Even this weak data is flattered by a rising population,” said James Smith, research director at the Resolution Foundation.

“After accounting for population growth, the UK economy hasn’t grown since early 2022, and fallen far behind its pre-cost-of-living crisis path, with an equivalent loss of around £1,500 per person.

“The big picture is that Britain remains a stagnation nation, and that there are precious few signs of a recovery that will get the economy out of it.”