The United Kingdom’s economy shrank in the third quarter, official data showed on Friday, confirming it has already been in recession forecast for some time. The Office for National Statistics (ONS) said in a statement that production declined 0.2 per cent in the July-September period after a marginal increase in the second quarter. Alongside the recession, the United Kingdom is facing a cost-of-living crisis, with UK inflation hitting a four-decade high of more than 10 percent.
GDP fell 0.2%, meaning the UK is the only group of seven economies that have not yet fully recovered from the pandemic and output is 0.4% below pre-Covid levels.
bank of england It said last week that the UK economy was set to go into a two-year recession if interest rates rose as much as investors were pricing in. It said that even without further rate hikes, the economy would shrink in five out of six quarters by the end of 2023.
The weak economic outlook provides a difficult backdrop for next week’s budget statement by Finance Minister Jeremy Hunt. Responding to Friday’s figures, he reiterated his warnings of tough decisions on tax and spending to improve the government’s credibility on Britain’s public finance and economic policy after Liz Truss’s brief stint as prime minister.
“I am not under the 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.
“But to achieve long-term, sustainable growth, we need to control inflation, balance the books and reduce debt. There is no other way.”
Prime Minister Rishi Sunak meanwhile announced tens of billions of pounds of tax hikes and spending cuts next week in an effort to plug a hole in public finances and restore credibility after the market turmoil triggered by his predecessor Liz Truss’s proposed tax cut. Preparing to announce.
How well the economy holds up will depend on people’s readiness to spend much of their income and undercut the estimated £200bn of additional savings created during the pandemic, when lockdowns restricted spending opportunities. Had given.
*With inputs from agencies
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