UK ‘not out of the wood’ after narrowly avoiding recession

Chancellor Jeremy Hunt says the UK economy is not out of the woods yet, despite narrowly missing a recession in the last quarter.

The UK narrowly avoided plunging into a recession last year, figures show, after the economy recorded zero growth in the last quarter of 2022.

The economy flatlined between October and December last year, the Office for National Statistics (ONS) said on Friday. Unrounded figures showed 0.01 per cent growth.

This preliminary estimate means that the UK did not see two consecutive quarters of declining gross domestic product (GDP) - the technical definition of a recession.

Speaking to broadcasters at a science facility in central London, Mr Hunt said: “The fact that we have avoided recession — in fact we are the fastest growing major country last year — shows there is underlying resilience in the UK economy.

“But we are not out of the woods.

“Inflation is still much too high and it is causing pain for families up and down the country, which is why we need to stick to our plan to halve inflation.

“If we do that and play to our strengths in science and technology, we really can be one of the most prosperous countries in Europe.”

In December, the economy dropped by 0.5 per cent partly due to workers from transport, the NHS, education and the postal service taking industrial action throughout the month.

The Bank of England still expects the UK to enter recession this year, though it will be shorter and less severe than previously thought.

“The economy contracted sharply in December meaning, overall, there was no growth in the economy over the last three months of 2022,” said ONS director of economic statistics Darren Morgan.

“In December public services were hit by fewer operations and GP visits, partly due to the impact of strikes, as well as notably lower school attendance.

“Meanwhile, the break in Premier League football for the World Cup and postal strikes also caused a slowdown.”

Across the year as a whole, the economy grew by 4 per cent as restaurants, bars and travel agents bounced back from the pandemic, the ONS said.

But chancellor Jeremy Hunt warned the UK was “not out the woods yet.”

He said: “The fact the UK was the fastest growing economy in the G7 last year, as well as avoiding a recession, shows our economy is more resilient than many feared.

“However, we are not out the woods yet, particularly when it comes to inflation.

“If we stick to our plan to halve inflation this year, we can be confident of having amongst the best prospects for growth of anywhere in Europe.”

Responding to the latest GDP figures, David Bharier, head of research at the British Chambers of Commerce (BCC), said: “Today’s GDP estimates, while indicating the economy technically avoided a recession, show some worrying developments.

“Small businesses have seen three years of economic shocks, including lockdowns, global supply chain crises, Brexit, and soaring energy costs.

“Our research has shown that most small firms have seen no improvements to sales, exports, or investment. Retailers and hospitality firms are among the worst affected by this current anaemic economy.

“There is some relief ahead in falling energy prices and with the potential peak in inflation, but firms face other headwinds, including continuing strike action and further uncertainty around our trading relationship with Europe.”

Meanwhile, Labour’s shadow chancellor called for “urgent measures” to be brought forward to alleviate the cost of living crisis.

Rachel Reeves MP said: “Today’s figures show us how - despite Britain’s great potential - our economy is stuck in the slow lane.

“We can be a leader in the industries of the future that will help grow our economy.

“And we must bring in urgent measures to prevent yet more harm from the cost of living crisis, using a proper windfall tax on oil and gas giants to stop the energy price cap going up in April so that people have more money in their pockets.”

The Liberal Democrats said the latest economic data was due to “gross incompetence and mismanagement” of the UK’s finances by the Conservative party.

The party’s Treasury spokeswoman Sarah Olney said: “Britain is dangling on over the edge of a recession after months of economic vandalism and chaos in government.

“The blame for these gloomy figures lies squarely with the government, who have botched budgets, failed to tackle inflation and have no plan for growth.

“The Conservative party hasn’t a shred of economic competence left.”