The Office for National Statistics has announced that gross domestic product (GDP) fell by 0.3% in the last three months of 2023 sending the UK into recession, because this was the second quarter in a row where GDP fell.
The ONS figures reveal that all major sectors – services (by 0.2%), production (1%) and construction (1.3%) – contracted.
Liz McKeown, director of economic statistics at the ONS said that overall, although the UK is in recession, 2023 was “basically flat”.
She said strikes, particularly those in the healthcare sector, weak retail sales and lower school attendances were all contributory factors.
Inflation and pay data
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Chancellor Jeremy Hunt told the BBC he was still positive about the prospects for 2024 given that core inflation, which excludes the price of energy, food, alcohol and tobacco, remained at 5.1% in January. He said: “The big picture is that, actually, since then the economy has been more resilient, unemployment has stayed low, real wages have been rising now for six months. And if we stick to our guns now, we can see light at the end of the tunnel.”
For the Institute of Directors, Dr Roger Barker, director of policy, said the ONS figures were a “psychological blow for business”.
He added: “In December, the output figures were dragged down by a 0.1% decline in the services sector and a 0.5% contraction in construction. However, the production sector actually grew by 0.6%.
“Looking at 2023 as a whole, the economy grew by 0.4%. December’s figures do not make a significant difference to the big picture: that the economy largely moved sideways last year.
“Business leaders will now be shifting their attention to the future. Recent data from our members suggests that business confidence has been slightly improving in recent weeks. It is important that this progress is sustained by the policy decisions of the chancellor and the Bank of England.”
TUC general secretary Paul Nowak was more damning. He said: “The UK economy is in dire straits. After years of Tory stagnation, we are now in technical recession.
“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.”
Former finance sector executive and current leadership consultant Margot Faraci put the recession down to the UK’s productivity failings: “The long-term trend is undeniable: the UK has long had a productivity crisis. Productivity is driven by investment, innovation, and competition. Business leaders have the opportunity to pull these levers every day,” she said.
“Inflation is holding steady at 4%, bringing a sigh of relief to bankers, business owners and people. But the reality is that without high productivity, wages remain stagnant. The standard of living for everyone depends on strong productivity.
“The missing piece of the productivity puzzle is leadership. The demise into stagnation is slow and impossible to feel day to day. Collectively, we kick the can down the road. The digital transformation stalls, the push into the new market pauses and the toxic team member is never dealt with.”
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