Economic output shrank 0.2 percent in the third quarter, less than analysts had forecast a 0.5 percent contraction in a Reuters poll, official data showed on Friday. However, it was the first fall in gross domestic product since the start of 2021, when Britain was still under severe coronavirus restrictions as households and businesses grappled with a severe cost-of-living crisis. Britain’s economy is now below its pre-pandemic size – it is the only G7 economy yet to fully recover from the COVID recession – and is smaller than it was three years ago on a calendar basis quarterly basis. The Resolution Foundation think tank said that while the fall was smaller than investors had feared, it left Britain on course for its fastest return to recession since the mid-1970s. Its research director James Smith said the data provided a sobering backdrop to Hunt’s budget announcement on November 17, when he will try to convince investors that Britain can fix its public finances – and its credibility on economic policy – after Liz Truss’s brief tenure as Prime Minister. . “The chancellor will need to strike a balance between putting public finances on a sustainable footing without further exacerbating the cost of living crisis or hitting already stretched public services,” Smith said. Responding to the data, Hunt reiterated his warnings that tough decisions on taxes and spending would be needed. “I am under no illusion that there is a difficult road ahead – one that will require extremely difficult decisions to restore confidence and economic stability,” Hunt said in a statement. People walk on the Millennium Bridge with London’s financial district in the background, amid the coronavirus disease (COVID-19) pandemic, in London, Britain, January 20, 2021. REUTERS/Hannah McKay “But to achieve long-term, sustainable growth, we need to contain inflation, balance the books and get the debt down,” he added. “There is no other way.”
SUFFERED REALITY
The Bank of England said last week that the British economy was set to enter a two-year recession if interest rates rose as much as investors had priced in. Even without further rate hikes, the economy will contract in five of the six quarters through the end of 2023, it said. “Fears of recession are coming true,” said Suren Thiru, chief financial officer of the Institute of Chartered Accountants in England and Wales. “This drop in output is the start of a punishing period as higher inflation, energy bills and interest rates outpace incomes, pushing us into a technical recession from late this year.” In September alone, when Queen Elizabeth’s funeral was marked by an emergency holiday that closed many businesses, Britain’s economy shrank by 0.6 percent, the Office for National Statistics said. That was a bigger monthly drop than the average forecast for a 0.4% contraction in a Reuters poll and the biggest since January 2021, when there was a COVID-19 lockdown. However, gross domestic product data for August was revised down to show a marginal contraction of 0.1% compared with the initial reading of a contraction of 0.3%, and GDP in July was now seen to have increased by 0.3%, against previous estimate of 0.1%. The upward revisions to the July and August GDP figures mainly reflected new, quarterly figures for health and education output, alongside some stronger readings from the professional and scientific and wholesale and retail sectors, the ONS said. Report by William Schomberg and David Milliken. Editing by Kate Holton and Catherine Evans Our Standards: The Thomson Reuters Trust Principles.
