Britain's Prime Minister Rishi Sunak hosts a press conference inside the Downing Street Briefing Room, in central London, on December 7, 2023, after Britain and Rwanda sign a new treaty to transfer illegal migrants to the African country. Britain and Rwanda signed a new treaty on Tuesday in a bid to revive a controversial proposal by London to transfer migrants to the East African country that was blocked by the UK courts. The agreement, which UK Prime Minister Rishi Sunak says is crucial to achieve his pledge of slashing irregular migration before a general election expected next year, was signed in Kigali. (Photo by James Manning / POOL / AFP) (Photo by JAMES MANNING/POOL/AFP via Getty Images)

UK Economy Slides into Recession

Last updated Feb 15, 2024

Britain’s economy fell into a recession in the second half of 2023, a tough backdrop ahead of this year’s expected election for Prime Minister Rishi Sunak who has promised to boost 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, 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 Conservative 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.

Finance minister 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.”

Reuters/Hauwa Abu