The Office for National Statistic’s released GDP figures showing that the UK economy is now on the brink of recession. The UK’s total economic output fell by 0.1 per cent in October, having also fallen in September.
This marks two consecutive months of negative gross domestic product (GDP) growth for the first time since the beginning of the pandemic, with the services sector suffering the most
Julian Jessop, economics fellow at the free market think tank the Institute of Economic Affairs, said the UK may already be experiecing a recession.
She said: “The second successive monthly fall in economic activity in October should put the UK firmly on recession watch. Indeed, output per head may already be falling for the second quarter in a row.”
Jessop said that the UK’s manufacturing sector appears to be struggling even more than in the rest of Europe, notably Germany and France.
She added: “Nonetheless, the new government’s negative rhetoric over the summer and the anticipation of a tight Budget have damaged sentiment and encouraged many households and business to put spending, hiring and investment on hold.
“The Budget itself was even tougher than expected. The large increases in spending, taxation and borrowing were bound to increase uncertainty. It is simply not possible to shift two percent of national income from the private to the public sectors without disrupting the economy, especially given the gap in productivity between the two.”
Jessop said there was some good news, as she explained: “The latest GfK survey suggests that consumer confidence actually improved in December, with sentiment on the outlook for personal finances turning positive again. Real incomes are still likely to recover further and unemployment is still low.
“One of the few sectors to do well in October was legal services, suggesting that the Budget was at least good news for tax lawyers.
“The Bank of England’s staff forecast of 0.3 per cent growth in the fourth quarter is looking even more optimistic. Zero now seems more realistic. At some point, the Monetary Policy Committee will shift to worrying much more about the downside risks to growth and inflation – perhaps not next week, but soon.”
London’s blue chip index, the FTSE 100, was knocked by the figures. It closed the week down 11.43 points, or 0.14 per cent lower to end the day at 8,300.33.
Sterling was lower as fears over the services sector saw growth stall for the month, it fell 0.43 per cent at $1.262 and down 0.6 per cent against the euro at 1.202.
Darren Morgan from the ONS says there is no official definition of a recession; however, it is largely considered to be at least two consecutive quarters of negative Gross Domestic Product (GDP).
This means it needs to fall for six months in total.
The economy went into a recession, using this definition, a year ago, because GDP fell between July and September and then again between October and December.
Things improved between January and March 2024, when UK GDP grew 0.6 per cent.
