UK Enters Technical Recession

The UK economy fell into recession at the end of last year as households cut back on spending in response to spiralling interest rates and rising living costs.

A recession is defined as two consecutive three-month periods where the economy contracts rather than grows.

The Office for National Statistics said gross domestic product (GDP) fell by a larger than expected 0.3% in the three months to December after a decline in all main sectors of the economy and a collapse in retail sales in the run-up to Christmas.

It followed a drop of 0.1% in the third quarter, confirming a second consecutive quarter of falling national output – the technical definition of a recession.

In response to the data, Chancellor Jeremy Hunt said:
“High inflation is the single biggest barrier to growth which is why halving it has been our top priority. While interest rates are high – so the Bank of England can bring inflation down – low growth is not a surprise.

“But there are signs the British economy is turning a corner; forecasters agree that growth will strengthen over the next few years, wages are rising faster than prices, mortgage rates are down and unemployment remains low. Although times are still tough for many families, we must stick to the plan – cutting taxes on work and business to build a stronger economy.”

Kate Nicholls, Chief Executive of UKHospitality, said:
“The economy officially entering a technical recession is hugely concerning. Consumer confidence has already taken a huge hit over the past year as the cost-of-living crisis bites and today’s news will dent it even further.

“That will be a big worry for hospitality businesses up and down the country, as they need support from consumers more than ever.

“As we head towards the Budget, I’d urge the Chancellor to look to hospitality as a sector that has a proven track record of driving growth and stimulating demand in the economy.

“Introducing a lower rate of VAT for hospitality and capping business rates increases would allow venues to reduce those incredibly high business costs and keep price rises at bay – that would be good for the public, businesses and the economy.”