Official figures released by the Office for National Statistics have confirmed that Britain’s economy experienced a shallow recession last year. This presents a challenge for Prime Minister Rishi Sunak as he seeks to reassure voters of the safety and stability of the economy ahead of an expected election later in the year. The Gross domestic product (GDP) contracted by 0.1% in the third quarter and 0.3% in the fourth quarter of last year.
These figures may be disappointing for Sunak, especially as the opposition Labour Party has been quick to criticize him for overseeing what they are calling “Rishi’s recession.” While there are indications that the economy started 2024 on a stronger footing, with GDP growing by 0.2% in January and continued growth in February and March, the country still has a long way to go in recovering from the impact of the COVID-19 pandemic.
Overall, Britain’s economy only grew by 0.1% in 2023, marking its weakest performance since 2009 during the global financial crisis, excluding the major setback in GDP caused by the pandemic in 2020. The Bank of England has hinted at the possibility of cutting interest rates as inflation approaches a point that would allow for such a move. However, the economy is expected to grow by only 0.25% this year according to the Bank of England, while official budget forecasters anticipate a 0.8% expansion.
Despite these challenges, there are some positive signs, such as growth in households’ real disposable income and increased savings as the savings ratio rose slightly in the final quarter of last year. Following the release of these figures, the value of the British pound remained relatively stable against major currencies like the U.S. dollar and the euro.