The UK economy shrank by 0.3% in the last quarter of 2023, marking the second consecutive quarter of contraction and pushing the country into a technical recession, according to the Office for National Statistics (ONS).
The ONS said that the decline in gross domestic product (GDP) – the broadest measure of economic activity – was driven by falls in all the main sectors, including services, construction and production. The figure was worse than the 0.1% drop that analysts and markets had expected.
The ONS also revised the GDP figure for the previous quarter, from July to September, from zero to -0.1%, confirming that the UK had entered its first recession since 2020.
The recession comes as a blow to Prime Minister Rishi Sunak, who had pledged to “grow the economy” as one of his five critical promises in January 2023. It also poses a challenge for Chancellor Jeremy Hunt, who is due to deliver his Budget on 6 March amid rising interest costs on UK government borrowing.
The ONS said that the economic slowdown in the fourth quarter was partly due to the impact of the Omicron variant of COVID-19, which led to renewed restrictions and reduced consumer confidence and spending. It also cited supply chain disruptions, labour shortages and higher energy prices as factors that weighed on business activity and investment.
The ONS director of economic statistics, Liz McKeown, 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, partially offset by increases in hotels and rentals of vehicles and machinery.”
The ONS also reported that the economy shrank by 0.1% in December alone, as retail and wholesale sectors suffered lower demand during the festive season.
Shadow chancellor Rachel Reeves said that the data showed that Mr Sunak’s pledge to grow the economy was “in tatters” and accused the government of “failing to act on the cost of living crisis”.
She said: “This is Rishi Sunak’s recession, and the news will be deeply worrying for families and businesses across Britain.”
