Skip to content 
Search

Latest Stories

Recession hits economy, increases Sunak’s election challenge

Britain’s economy stands just 1% higher than its level of late 2019, before the Covid-19 pandemic struck – with only Germany among G7 countries faring worse

Recession hits economy, increases Sunak’s election challenge

The economy entered a recession in the latter half of 2023, presenting a challenging environment in the lead-up to the anticipated election this year for prime minister Rishi Sunak, who has committed to boosting growth.

Gross domestic product (GDP) contracted by 0.3% in the three months to December, having shrunk by 0.1% between July and September, official data showed.


The fourth-quarter contraction was deeper than all economists' estimates in a Reuters poll, which had pointed to a 0.1% decline.

Sterling weakened against the dollar and the euro. Investors added to their bets on the Bank of England (BoE) cutting interest rates this year and businesses called for more help from the government in a budget plan due on March 6.

Thursday's data means Britain joins Japan among the Group of Seven advanced economies in a recession, although it is likely to be short-lived and shallow by historical standards. Canada has yet to report GDP data for the fourth quarter.

Britain's economy stands just 1% higher than its level of late 2019, before the Covid-19 pandemic struck - with only Germany among G7 countries faring worse.

Sunak promised to get the economy growing as one of his key pledges to voters last year. His Tory Party has dominated British politics for much of the past seven decades, with a reputation for economic competence.

But Labour is now more trusted with the economy, according to opinion polls.

British households are due to see their first drop in living standards between one national election and the next since the Second World War, analysts have said.

Ruth Gregory, deputy chief UK economist at Capital Economics, said the GDP figures had more political significance than economic, with voters due to elect lawmakers in two constituencies on Thursday (15).

"The news that the UK slipped into technical recession in 2023 will be a blow for the prime minister on a day when he faces the prospect of losing two by-elections," Gregory said.

The Chancellor of the Exchequer Jeremy Hunt said there were "signs the British economy is turning a corner" and "we must stick to the plan – cutting taxes on work and business to build a stronger economy."

The opposition Labour Party rejected those claims.

"The prime minister can no longer credibly claim that his plan is working or that he has turned the corner on more than 14 years of economic decline under the Conservatives," Rachel Reeves, Labour's top economy official, said.

Media reports said Hunt was seeking to cut billions of pounds from public spending plans to fund pre-election tax cuts in his budget, if penned in by tight finances.

The Office for National Statistics (ONS) said the economy grew 0.1% across 2023 compared with 2022. The BoE forecasts output will pick up slightly in 2024 but only to 0.25% growth.

Britain's economy has been stagnating for nearly two years.

The Covid-19 pandemic triggered the deepest contraction on record over two quarters in early 2020 when the economy slumped by 22%. Before that, the global financial crisis sparked a severe recession that lasted just over a year, from the second quarter of 2008 through to the second quarter of 2009.

Interest Rate Cuts Ahead?

Data on Wednesday (14) showed inflation held at a lower-than-expected 4.0% in January, reviving talk among investors about a BoE rate cut as soon as June. But strong wage growth reported on Tuesday underscored why the BoE remains cautious.

Hunt said he was hopeful the central bank could start to cut borrowing costs by the "early summer." Investors were pricing a roughly 68% chance on a first BoE rate cut at its June meeting.

Governor Andrew Bailey said on Wednesday that there had been some signs of an economic upturn in the economy but he still wanted more evidence that inflation pressures were abating.

"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," Sanjay Raja, chief UK economist at Deutsche Bank, said.

Economic output fell by 0.1% in monthly terms in December after 0.2% growth in November, the ONS said.

Manufacturing, construction, and wholesale were the largest contributors to the decrease in GDP in the fourth quarter.

GDP per person has not grown since early 2022, representing the longest such unbroken run since records began in 1955.

(Reuters)

More For You

Hasmukh Shah

The certificate was presented to Shah at the Welsh parliament by Anita Bailey, Home Office Director Windrush Unit.

Hasmukh Shah receives UK minister’s certificate of appreciation

A prominent Asian doctor has been recognised for his services to the community. Prof Hasmukh Shah has received a certificate of appreciation for his contribution and services to the United Kingdom.

The certificate was issued by Seema Malhotra MP, UK Minister for Migration and Citizenship, as part of the Windrush Cymru Elders and Race Council Cymru’s Windrush work in Wales.

Keep ReadingShow less
Dalai-Lama-Getty

Dalai Lama looks on as offerings presented by Buddhist followers are laid on a table during a Long Life Prayer offering ceremony at the Main Tibetan Temple in McLeod Ganj, near Dharamsala, India, on June 30, 2025.(Photo: Getty Images)

Getty Images

India says Dalai Lama alone can decide successor

A SENIOR Indian minister has said that only the Dalai Lama and the organisation he has established have the authority to decide his successor as the spiritual leader of Tibetan Buddhism. The comment runs contrary to China’s long-standing position on the matter.

The Dalai Lama, who fled to India in 1959 following a failed uprising against Chinese rule, said on Wednesday that after his death he would be reincarnated as the next spiritual leader, and that only the Gaden Phodrang Trust would be able to identify his successor. He had earlier said that the next Dalai Lama would be born outside China.

Keep ReadingShow less
Pakistan’s ‘killer mountain’ claims Czech climber’s life

FILE PHOTO: Foreign tourists and their guides trek down from Nanga Parbat base camp. (Photo by AMELIE HERENSTEIN/AFP via Getty Images)

Pakistan’s ‘killer mountain’ claims Czech climber’s life

A CZECH mountaineer fell to her death on the world's ninth-highest peak, Pakistan officials said Friday (4), becoming the first casualty of the summer climbing season in the country.

Klara Kolouchova, 46, the first Czech woman to summit the world's two highest mountains, died on Thursday (3) after falling on the lower slopes of Nanga Parbat.

Keep ReadingShow less
Mamdani’s win over Cuomo reshapes NYC political landscape

Zohran Mamdani addresses supporters in Queens, New York City

Mamdani’s win over Cuomo reshapes NYC political landscape

INDIAN AMERICAN lawmaker Zohran Kwame Mamdani last week clinched the Democratic nomination for mayor of New York City, defeating former governor Andrew Cuomo in what is being described as one of the most unexpected results in recent city political history.

Mamdani, 33, a state assemblyman representing Queens and a self-declared democratic socialist, stands on the brink of becoming New York’s first Muslim and Indian American mayor.

Keep ReadingShow less
uk home office

The PAC said the Home Office relies on airline passenger records to track departures but has not reviewed this data since 2020. (Photo: iStock)

iStock

MPs say Home Office unaware if foreign workers leave UK after visas expire

THE HOME OFFICE does not know whether foreign workers are leaving the UK or staying on illegally after their visas expire, according to a cross-party group of MPs.

The Public Accounts Committee (PAC), which oversees government spending, said the department has not analysed exit check data since the skilled worker visa was introduced in 2020, the BBC reported.

Keep ReadingShow less