Credit: Envato Elements
The Office for National Statistics (ONS) has reported that the United Kingdom’s economy slipped into a technical recession in the fourth quarter of 2023, with all three main sectors experiencing contraction.
According to the ONS, services output declined by 0.2%, production by 1%, and construction output by 1.3% during the fourth quarter. This contraction follows a year of sluggish growth, with the British GDP estimated to have increased by just 0.1% compared to the previous year.
Finance Minister Jeremy Hunt commented on the challenges facing the economy, highlighting high inflation as the primary barrier to growth. He noted that inflation remains well above the Bank of England’s 2% target, necessitating firm interest rates and hindering economic expansion.
Despite these challenges, Hunt expressed optimism about the future, citing forecasts of strengthened growth, rising wages outpacing prices, lower mortgage rates, and low unemployment rates.
Marcus Brookes, chief investment officer at Quilter Investors, characterized the recession as potentially shallow and short-lived, attributing it to factors such as high inflation, labor market weaknesses, and adverse weather conditions. Brookes anticipates a muted recovery throughout 2024, with easing inflation potentially alleviating pressure on households and supporting economic recovery.
Neil Birrell, chief investment officer at Premier Miton Investors, acknowledged concerns over economic strength but highlighted the potential for interest rate cuts if inflation and growth accelerate.
As the UK navigates these economic challenges, experts emphasize the importance of monitoring inflation, wage growth, and consumer demand indicators for insights into the country’s recovery trajectory.
