“We’re on the up!” claimed the Daily Express about the British economy on Thursday . Sorry, loyal Conservative cheerleaders, but exactly the reverse is true. Instead of being on the up, we’re on the slide. On Thursday, the Office for National Statistics announced that the UK is in fact in recession, with a 0.3% drop in gross domestic product for the last quarter of 2023 to follow a 0.1% drop in the third quarter. The economy is therefore getting smaller. This is a recession. It is a huge national blow, both economically and politically.
It is true that the slide into recession has been a gentle one. Few economists believe that the announcement portends a downward lurch to compare with the recession of 1980 or the one after the financial crisis in 2009, when GDP fell by more than 4%. Do not, though, be misled by talk of a “technical” recession. An economy is either growing or it is not. Ours is not growing. It is shrinking.
It is also true that an economy slipping into recession is not a uniquely British problem. This week, Japan did the same, allowing Germany to replace it as the world’s third largest economy (after the US and China). Germany itself hovers on the threshold, while few European economies can expect anything much better than stagnant growth in 2024. Britain, though, faces higher interest rates and higher inflation than Germany and the eurozone, while its poor long-term records on investment and wage growth leave the country particularly ill-equipped to recover quickly.
In any case, a shallow recession does not soften the serious blow for households. Here, GDP per head is down for the seventh successive quarter, not the second. The Resolution Foundation calculates that this is equivalent to a nearly £1,500 real-terms loss per household since the cost of living crisis accelerated after Russia’s invasion of Ukraine. The same loss per household since 2009 now amounts to around £23,000. With interest rates and inflation still high, the pinch is set to get tighter still.
All this would be serious enough merely for its effects on the national economy and on individual living standards. But it will also shape the political battleground in election year. At the start of 2023, Rishi Sunak promised, in one of his five pledges, that his government would “grow the economy, creating better-paid jobs and opportunity right across the country”. A year later, he has not grown the economy. He has put it into reverse. It is hardly surprising that a newly published Ipsos survey finds that more than two-thirds of British people say the country is in decline – well above the average for the 28 nations covered in the research.
The tragedy is not merely that Mr Sunak has overseen this descent into recession. It is also that he lacks any clue about how to extricate Britain from it. Before the GDP figures were published on Thursday, the Treasury was already briefing that Jeremy Hunt is considering slashing public spending to fund pre-election tax cuts next month. Perhaps this was merely pre-byelection and pre-Budget expectation management. But it embodies precisely what is wrong about this government. It forgets nothing and learns nothing. It sacrifices the national good for a political fetish that will leave public services even weaker than they are already. No wonder the public think that the country is in decline. At least they now know who they should blame.
