After the economy narrowly escaped slipping into recession in the second part of last year, Jeremy Hunt praised Britain’s “resilience” today.
Although UK plc saw a pitiful zero growth between October and December, there was no technical recession as a result.
A 0.5% decline in December, which was exacerbated by strikes and snow, offset a higher performance earlier in the month.
The statistics are better than anticipated, with overall growth of 4% from 2022 to now.
However, GDP is still below pre-Covid levels, and the Bank of England has forecast that the economy will contract in each of the year’s four quarters.
The Chancellor declared: “Our economy is more resilient than many anticipated. The fact that the UK had the fastest expanding economy in the G7 last year, in addition to averting a recession, proves as much.
However, especially in terms of inflation, we are not yet out of the woods.
“If we follow through on our plan to cut inflation in half this year, we can be confident that we will have among the best growth prospects in all of Europe.”
However, because the GDP is expected to contract by such a little amount every quarter, even a small change might ruin the forecasts.
Technically, a recession is characterized by two consecutive quarters of declining GDP. In the three months from July to September, the economy shrank by 0.2%.
Darren Morgan, director of economic statistics for the ONS, stated that the economy shrank significantly in December and that there was no total economic growth for the final three months of 2022.
As a result of strikes, there were fewer operations and GP visits in December, as well as noticeably reduced school enrollment.
Meanwhile, postal strikes and the break in Premier League football for the World Cup both contributed to a slowdown.
However, a successful month for lawyers, an increase in automobile sales, and the cold snap’s increased energy generation largely countered these declines.
In all, the GDP expanded by 4% in 2022. Restaurants, pubs, and travel agencies had a great year despite recent revenue squeezes.
Meanwhile, the pandemic’s impacts on health and education started to fade.
The National Institute of Economic and Social Research (NIESR) stated earlier this week that it anticipates the UK avoiding a protracted recession this year.
High inflation, on the other hand, implies that it will continue to “feel like a recession,” at least for seven million of the poorest households, according to NIESR.
According to the think tank, in the fiscal year 2023–2024, one in four people will “not be able to meet in full their planned energy and food bills from their post-tax income.” The percentage has increased from one in five the previous year.
The forecast is substantially more pessimistic according to the IMF.
The findings, according to David Bharier, Head of Research at the British Chambers of Commerce, revealed “some worrying developments.”
According to him, eight out of the fourteen service sectors experienced contractions in Q4 2022, and the monthly GDP declined by 0.5% in December.
Small firms have experienced economic shocks over the past three years, including lockdowns, disruptions in the global supply chain, Brexit, and rising energy prices.
According to our analysis, the majority of small businesses have not experienced an increase in sales, exports, or investment. One of the industries most negatively impacted by the current weak economy is retail and hotel businesses.
‘With energy prices on the decline and inflation maybe reaching its high, there will be some relief soon. However, businesses also have to contend with ongoing strike activity and growing ambiguity regarding our trade connections with Europe.
Businesses need to see a long-term strategy for expansion and tangible steps in the 2019 budget, including proposals for infrastructure, taxes, skills, and trade.
According to Susannah Streeter, head of money and markets at Hargreaves Lansdown, “Although a distinct chill descended in December as bad weather, strikes, and more excruciating price hikes blew in,” the recession wasn’t severe enough to put Britain into it.
There is still a possibility that the economy may experience two consecutive quarters of negative growth this year, but the gloomy period ahead is expected to be shorter and shallower than expected in the Autumn, when the nation was also beset by financial turbulence.
So, rather than traveling back in time and preparing for a recessionary return to the 1970s brought on by energy shocks, skyrocketing inflation, and industrial conflict, we might be headed for a period of stagnation like to that of the early 2000s.
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