Rishi Sunak hit with a major blow as Britain has officially entered into a recession which is bad new for the government as growing the economy was one of the Prime Minister’s five pledges.
According to the latest Office for National Statistics (ONS), between October and December gross domestic product (GDP) shrank 0.3%, this is larger fall than economists expected as they did forecast a 0.1% contraction.
In the three months from July to September there was a negative economic growth of 0.1%, it is expected that this recession will be short lived.
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.”
On X, Labour leader Sir Keir Starmer wrote: “Rishi Sunak has failed to turn the corner on 14 years of Tory economic decline.
“Britain is hit by a recession and it’s working people who will pay the price. It’s time for change. Only Labour will deliver it.”
Shadow chancellor Rachel Reeves said Prime Minister’s pledge to grow the economy is complete “tatters.”
Reeves said, “The Prime Minister can no longer credibly claim that his plan is working or that he has turned the corner on more than 14 years of economic decline under the Conservatives that has left Britain worse off.
“This is Rishi Sunak’s recession and the news will be deeply worrying for families and business across Britain.”
Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners, said: “A recession has repercussions for people’s finances as a weaker economy can cause earnings to stagnate and redundancies to rise as businesses focus on cutting costs rather than investing in expansion and new hires.
“A downturn, albeit mild, will certainly be a cause for concern for people whose household finances have already been battered by a barrage of rising bills over the past two years.
“The weak growth data will pile pressure on the Bank of England to cut interest rates sooner rather than later to bolster the economy, which has been heavily impacted by high inflation and still-high borrowing costs.”
