THE UK economy shrunk by 0.2 per cent between July and September, in what some experts say could be the start of the longest recession since record began.
The Office for National Statistics (ONS) said that gross domestic product (GDP) had fallen by 0.6% in September, in part due to the Queen’s funeral.
It added to a 0.2% drop for the full quarter – lower than had been expected as the ONS revised its estimates for July and August.
“With September showing a notable fall partly due to the effects of the additional bank holiday for the Queen’s funeral, overall the economy shrank slightly in the third quarter,” said ONS director of economic statistics Darren Morgan.
“The quarterly fall was driven by manufacturing, which saw widespread declines across most industries.
“Services were flat overall, but consumer-facing industries fared badly, with a notable fall in retail.”
It could be the beginning of a recession – which is defined as two quarters of shrinking GDP in a row.
The reading comes just a week after the Bank of England published a caveated forecast that the UK might be headed for an eight-quarter recession – the longest consecutive recession since reliable records began in the 1920s.
However, the bank cautioned that this would only happen if it raises interest rates to around 5.2% – which the market was expecting at the time.
It said it did not expect rates to reach such a high level, which would imply that the recession could be less drawn out.
The September figure was worse than expected – analysts had forecast a 0.5% drop during the month, according to Pantheon Macroeconomics.
However, the ONS changed its readings for August and July, helping for the quarter as a whole. The economy was previously thought to have shrunk by 0.3% in August but that was revised to 0.1%.
In July the economy had previously thought to have risen by 0.1% – the ONS changed that to 0.3%
Chancellor Jeremy Hunt said: “We are not immune from the global challenge of high inflation and slow growth largely driven by Putin’s illegal war in Ukraine and his weaponisation of gas supplies.
“I am under no illusion that there is a tough road ahead – one which will require extremely difficult decisions to restore confidence and economic stability.
“But to achieve long-term sustainable growth, we need to grip inflation, balance the books and get debt falling. There is no other way.”
But the SNP’s shadow chancellor Alison Thewliss MP said the latest figures must be a wake-up call for both Hunt and the Prime Minister.
“With a long and deep recession looming, the grim reality is that far too many people are frightened to open their bills, and are unable to put food on the table or heat their homes," she said.
“These statistics are a damning indictment of the Tories’ disastrous economic record - driven by deep austerity, targeting of the most vulnerable in society, and imposing an extreme Brexit that has hammered the economy, trade and led to staff shortages.
“It’s beyond any doubt that only with the full powers of independence will we be able to properly tackle the cost-of-living crisis, escape Westminster control, and build a fairer and more prosperous future.”
Meanwhile, the Scottish Greens economy spokesperson Maggie Chapman MSP called the recession the cost of Tory government.
She said: "There may be global challenges, but the cruel and incompetent Tories have made the situation many times worse. Time and again they have proven that they are unfit to run the economy and unfit to govern. From beginning to end this is a crisis of their very own making.
“Even by their own chosen barometer of success, GDP and growth, they are failing very badly. If the recession warnings prove to be true then it will be a recession made in Downing Street and with Tory fingerprints all over it."
She went on: "Things can't go on like this. It is totally unsustainable and people will die.
"Next week's budget will only make things worse, with the Chancellor having already made clear that cuts and 2010-style austerity will be at its heart.
“It doesn't need to be like this. It is the cost of a disgraceful and reactionary Tory government that Scotland has consistently opposed. It is more vital than ever that we take our future into our own hands and ensure that we only get the governments that we vote for.”
