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Thu. Apr 25th, 2024

Britain’s economy has slipped into a recession, according to official data released Thursday, dealing a significant blow to Prime Minister Rishi Sunak and his Conservative party, which faces an anticipated defeat in an upcoming general election later this year.

The Office for National Statistics (ONS) reported a contraction of 0.3 percent in gross domestic product (GDP) for the fourth quarter of 2023, following a 0.1 percent decline in the previous three months, marking the country’s entry into recession, defined as two consecutive quarters of economic decline.

Despite economists’ projections of a potential short-lived recession, the data represents a major setback for Sunak, who has prioritized economic growth during his tenure. The timing is particularly precarious as the Conservatives trail significantly behind the main opposition Labour party in recent polls. Additionally, with two crucial by-elections underway in Wellingborough, central England, and Kingswood in the southwest, the Conservatives face the risk of losing their once steadfast strongholds.

Capital Economics analyst Ruth Gregory characterized the recession as “mild” but acknowledged its political implications, especially on a day marked by the possibility of electoral losses. Gregory also noted that timely indicators suggest the recession may already be approaching its end. The economic downturn in the fourth quarter was broad-based, with all major sectors experiencing contractions, notably manufacturing and construction.

The ONS reported that the economy remained stagnant in 2023, with a mere 0.1 percent expansion, a significant drop from the 4.6 percent growth witnessed in 2022. The news coincided with Japan also entering a recession, reflecting broader global economic challenges. Despite disappointing GDP figures, MUFG Bank senior economist Henry Cook emphasized the resilience of the labor market and a gradual improvement in consumer confidence, indicating a less severe crisis.

Finance minister Jeremy Hunt sought to reassure the public, acknowledging the challenges posed by high inflation, currently at 4.0 percent, double the Bank of England’s target rate. Hunt reiterated the government’s commitment to its economic agenda, including tax cuts aimed at stimulating growth. Chancellor of the Exchequer Hunt is expected to announce tax cuts in the upcoming budget, seen as an effort to narrow the gap with Labour.

Labour’s finance spokeswoman Rachel Reeves seized on the recession data to criticize the Conservative government’s economic policies, attributing the downturn to Sunak’s leadership. Reeves argued that Sunak’s promise to deliver growth lies in tatters. While UK inflation has declined from its peak in October 2022, energy and food prices remain elevated, posing ongoing challenges for families and businesses across the country.

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