Official figures have confirmed that Britain’s economy slipped into a shallow recession last year, presenting a challenge for Prime Minister Rishi Sunak to reassure voters about the state of the economy before an upcoming election. The Office for National Statistics reported that the Gross Domestic Product (GDP) contracted by 0.1% in the third quarter and 0.3% in the fourth quarter of last year, remaining in line with initial estimates.
These figures are disappointing for Sunak, who is facing criticism from the opposition Labour Party for overseeing what they call “Rishi’s recession.” However, there are some positive signs for the economy at the outset of 2024, with GDP expanding by 0.2% in January from December and recent surveys indicating continued growth in February and March.
Despite these positive trends, Britain has been slow to recover from the impacts of the COVID-19 pandemic, with the economy only 1% larger than it was in late 2019. In 2023, the economy grew by just 0.1%, marking its weakest performance since 2009 following the global financial crisis.
The Bank of England has suggested that British inflation is nearing a point where they can start cutting interest rates. They expect the economy to grow by 0.25% this year, whereas official budget forecasters anticipate a 0.8% expansion. The exchange rate for the Sterling remained relatively stable against the U.S. dollar and the euro following the release of the economic data.
Additionally, the latest figures show an increase in households’ real disposable income by 0.7% compared to the previous quarter, as well as a slight rise in the savings ratio to 10.2% in the final quarter of last year. These indicators suggest a cautious approach from consumers in light of the economic uncertainty.