British economy in recession

LONDON, ENGLAND | Xinhua | The British economy has entered a recession following two successive quarters of contraction in the second half (H2) of 2023, official data showed Thursday.

Britain’s gross domestic product (GDP) fell by 0.3 percent in the fourth quarter (Q4) of 2023 after shrinking by 0.1 percent in Q3, the country’s Office for National Statistics (ONS) said in a report.

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, ONS Director of Economic Statistics Liz McKeown said.

While it has now shrunk for two consecutive quarters, across 2023 as a whole the economy has been broadly flat, McKeown added.

Britain has seen a stagnating economy and high inflation for about two years. Households have felt the squeeze amid a cost-of-living crisis. Widespread strikes broke out during the summer of 2022, and pay disputes were ongoing.

“High inflation is the single biggest barrier to growth which is why halving it has been our top priority,” Chancellor of the Exchequer Jeremy Hunt said on Thursday.

“While interest rates are high — so the Bank of England can bring inflation down — low growth is not a surprise,” Hunt added.

Britain’s central bank has held its benchmark interest rate at a nearly 16-year high of 5.25 percent. It estimated in an early February report that economic growth is expected to pick up gradually, in large part reflecting a waning drag on the rate of growth from past rate increases.

Monetary policy will need to “remain restrictive for sufficiently long” to return inflation to the 2-percent target sustainably in the medium term in line with the central bank’s remit, the Bank of England said in the report.

“While the Bank of England’s focus will likely remain on price data, the bigger drop in output and the politics of being in a technical recession will no doubt become uncomfortable especially with the Bank Rate at highly restrictive levels,” said Sanjay Raja, Deutsche Bank’s chief UK economist, on Thursday. ■