Get all your news in one place.
100’s of premium titles.
One app.
Start reading
The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

UK ‘not out of the woods yet’ after economy dodges recession by a whisker; Russia cuts oil output – as it happened

United States Recession United Kingdom Economy Russia Oil GDP NCA Elvira Nabiullina Jeremy Hunt

Closing summary

Time for a recap, after a day in which the UK very narrowly avoided falling into a technical recession.

Today’s GDP report has shown that the UK economy stagnated in the final quarter of 2022, narrowly avoiding a recession despite output shrinking by more than expected in December.

The economy escaped a recession in 2022 by “the skin of its teeth (£77m to be precise)“, says Paul Dales of Capital Economics.

The chancellor, Jeremy Hunt, has warned that the UK is not ‘out of the woods’, but also claimed the economy was showing more resilience than expected.

Hunt pointed out that the UK grew faster than other G7 countries during 2022 – but it is the only one yet to have recovered all the output lost in the pandemic.

Shadow chancellor Rachel Reeves said the latest GDP figures should be a “wake-up call” for the Government.

In December alone, GDP shrank by 0.5%.

Darren Morgan, director of economic statistics at the Office for National Statistics (ONS), says:

“The economy contracted sharply in December meaning, overall, there was no growth in the economy over the last three months of 2022.

“In December public services were hit by fewer operations and GP visits, partly due to the impact of strikes, as well as notably lower school attendance. Meanwhile, the break in Premier League football for the World Cup and postal strikes also caused a slowdown.

“However, these falls were partially offset by a strong month for lawyers, growth in car sales and the cold snap increasing energy generation.

Several economists predicted the UK economy could contract in the current quarter.

Here’s the full story, and analysis of how 2023 will be tough:

Plus in other news…

Labour’s shadow chancallor, Rachel Reeves, has ured the government to wake up to the problems in the economy.

Speaking to broadcasters during a visit in Bolton, Reeves said:

“I hope today’s numbers are a wake-up call to the Government because the economy now is just flatlining along the bottom.

“We’re the only major G7 economy that is still smaller than it was before the pandemic – and zero growth is not a success.

“The Government now urgently need to put in place a real plan for economic growth, as well as tackling the cost-of-living crisis that is affecting so many families and pensioners right now.”

Wall Street has opened in the red, following losses in Europe and Asia already today.

The S&P 500 index of US shares has dipped by 0.15%, or 6 points, to 4,075 at the open.

The jump in the oil price today, after Russia announced it will cut production, has fuelled concerns of a downturn this year.

The US bond market is flashing warning signs. The yield, or interest rate, on 10-year American government debt has fallen below the equivalent yield on the two-year bonds.

That ‘inversion’ can be a sign that markets are pricing in a recession, as you’d normally expect the 10-year bond to yield more (to reflect the greater risk of lending for 10 years).

Stephen Innes, managing partner at SPI Asset Management, says:

Investors are getting a lot testier as the market favourite US recession lead indicator, 2’s 10’s, is flashing danger ahead for the US economy.

In London, the FTSE 100 index is now down 40 points, or 0.5%, at 7870, away from its record highs earlier this week.

Innes says:

European equities are trading definitively lower today as markets absorb the notion that rates may stay higher for longer and more thoroughly.

We also got a weak GDP report out of the UK -- contracting more than consensus expectations in December by 0.5% mom, driven entirely by a decline in services activity and provided a rude wake-up call to FTSE bulls.

Jeremy Hunt has said today he can’t afford ‘major’ new scheme to help people with energy bills from April, despite pressure to ditch plans for bills to jump this autumn.

Speaking to reporters this morning, Hunt implied that he was going to reject campaigner Martin Lewis’s call to shelve the planned increase, saying that he did not have the scope for a “major new initiative” on energy.

Asked if he was ruling out more support for households, he said:

We constantly keep the help we can give families under review.

But if you’re saying ‘do I think we’re going to have the headroom to make a major new initiative to help people?’, I don’t think the situation would have changed very significantly from the autumn statement, which was just three months ago.

Our Politics Live blog has all the details:

All energy suppliers in the UK have pledged to end the installation of prepayment meters in the homes of vulnerable customers, after damaging reports on how they were forcibly installed against people’s wishes, the government has said.

The Guardian reported last month that leading energy suppliers including Scottish Power, Ova and E.ON had stopped reclaiming debts from some prepayment meter customers. The Department for Business, Energy and Industrial Strategy, which is being carved into three new departments, said that all energy firms had agreed to stop the practice.

As energy prices have soared, many people are struggling to pay their bills and have fallen into debt.

The department said it had asked all suppliers to set out how they were supporting their customers, how many warrants to forcefully enter people’s homes they had applied for and how they would make up for any wrongdoing.

Over in Moscow, the head of Russia’s central bank has said that the risks of a global recession have decreased.

Russian central bank governor Elvira Nabiullina told a press conerence that the Bank had improved its forecasts for Russia’s economy this year. It now believes growth will fall beween -1% and +1% in 2023.

Speaking after the Bank of Russia left interest rates unchanged at 7.5% today, Nabiullina said:

The opening of China’s economy after the removal of COVID-19 restrictions, the fact that central banks in advanced economies are close to the peak of their interest rate increases, falls in energy prices, primarily in Europe - all of this has a positive effect on developing economies, including Russia’s key trade partners.

However, the positive effects of this for Russia will be restrained by sanctions.”

Bloomberg reported this week that president Putin’s government has been pressuring Russia’s Central Bank to be “more upbeat” about the country’s economy amid the invasion of Ukraine and international sanctions.

The National Crime Agency has delivered what is likely to be disappointing news for campaigners who have alleged that UK banks took part in “industrial-scale forgery”, by faking customer signatures on loan and mortgage agreements to repossess homes and recover debts.

The NCA launched an investigation on the request of the Treasury Select Committee back in July 2019, to review claims by the Bank Signature Forgery Campaign (BSFC).

After two and a half years, the NCA has told MPs that it found no evidence of a conspiracy or organised criminal racket by lenders:

It says:

“After careful and thorough examination we have not found evidence of serious or organised crime, or conspiracy to commit fraud or forgery offences that warrant further review and investigation, so will not be taking any further action in relation to these allegations of bank misconduct.

“The breakdown of the material does not support the central allegations made by the BSFC, nor does the material identify dishonest intent and gain by UK financial institutions. We know this will come as a disappointment to many of the individuals who have taken the time to share their material with the BSFC.”

However, the NCA letter suggests it may have found cases where signatures were potentially reproduced, though it appears to claim this was for” administrative” purposes.

While the FCA found “instances where firms had issued communications to customers that had been signed with the same digital signature attributed to different teams and staff” there were no suggestions the practice was ongoing:

The NCA says:

“Although we find that the material supplied suggests that, to the extent that discrepancies have been identified, signatures were being used for administrative convenience rather than to commit any criminal offence, we do believe the BSFC material highlights matters relating to signatures that need to be addressed.”

Now, the NCA is calling for a new policy over how banks use digital signatures on loans and mortgages.

“The National Economic Crime Centre will be recommending to partners that a transparent policy position be put in place with regard to the use of digital signatures on customer facing correspondence originating from the banks and their representatives.

This should be supported with clear advice available to customers about who to contact if they have queries or complaints in relations to these signatures.”

The UK’s economic performance has been ‘calamitous’, despite avoiding two quarterly contractions in a row, says Sam Tombs of Pantheon Economics.

Here’s why:

Analysis: UK can expect year of stagnation after narrowest of escapes from recession

It was a recession in all but name: that is the conclusion of many economists who argue that while the official data shows the UK economy stood still in the last three months of 2022 rather than contracting, it is still in bad shape, my colleague Phillip Inman writes.

To be precise, the economy actually expanded by 0.01% in the fourth quarter, an increase so statistically insignificant that it is rounded down to zero. Had Britain not added just £77m to its £2.2tn gross domestic product (GDP) then it would have fallen into a technical recession, characterised by two consecutive quarters of negative growth.

Stagnation is not a good look when there is so much that needs to happen – investment in green infrastructure, for instance – to improve living standards and meet net zero targets.

Here’s the full piece:

Updated

UK escaped recession by £77m

Britain’s economy really did come close to dropping into recession in the final quarter of last year.

In the end, UK output in Q4 was just £77m away from a contraction, Paul Dales of Capital Economics says.

But, Dales also predicts high inflation and high interest rates will trigger a recession this year.

Strikes on the trains, in the NHS and at Royal Mail hit the economy, he points out:

Health output fell by 2.8% m/m, partly due to fewer GDP appointments during the strikes, transport output was down by 3.1% m/m and arts/entertainment fell by 7.8% m/m (some of which was due to the absence of Premier League football due to the World Cup).

But some of the weakening from the +0.1% m/m rise in GDP in November was probably due to some underlying weakness as a result of high inflation and high interest rates.

NIESR: It still feels like a recession to most households.

This morning’s news that Britain dodged a recession at the end of last year will be “little consolation to most households”, which have seen significant hits to their real incomes over the course of the last year.

So says the NIERS thinktank, which predicts today that the economy will shrink by 0.2% in January-March.

Paula Bejarano Carbo, associate economist at NIESR, explains:

“Today’s ONS figures suggest that monthly GDP fell by 0.5 per cent in December, driven by a 0.8 per cent fall in services which saw significant decreases in human health and social work activities resulting from strikes and a drop-off in vaccination activity.

Interestingly, monthly output in consumer-facing services fell by 1.2 per cent in December following growth of 0.4 per cent in November; the ONS associates this surprise with the gains to food and beverage activity from the FIFA World Cup being overtaken by a 17 per cent loss in sports activities, and amusement and recreation activities due to the break in the Premier League.

The monthly data suggest that GDP was flat in the fourth quarter of 2022.

While this means that the UK avoided a technical recession in 2022 – that is, two consecutive quarters of contracting growth – it is important to remember that it will have felt like a recession for most households as the cost-of-living crisis eroded living standards in the UK.”

The government’s energy price guarantee, which capped the unit cost of electricity and gas for households, probably helped the UK avoid falling into recession last quarter.

Investec analyst Philip Shaw points out that household consumption eked out a 0.1% gain in real terms in the final quarter of 2022.

The Energy Price Guarantee was “undoubtedly” a major support over the period, Shaw explains:

In the event, domestic gas and electricity prices rose by 27%. Without the EPG, the increase would actually have been 80%, which would have very probably resulted in a significant fall in consumer spending.

The EPG was announced by Liz Truss in September, and meant that typical household bills would rise by about £2,500 a year. Before that, they were on track to jump to £3,549 (although there was no limit on what a customer could pay).

Shaw adds:

Another point of interest was the 4.8% increase on the quarter in business investment, maintaining its upward trend over the year as a whole, most likely aided by the ‘super deduction’ capital allowances.

Modupe Adegbembo, G7 Economist at AXA Investment Managers, predicts the UK economy will contract in the current quarter.

That would mean nine months without growth.

Following today’s GDP report, showing the economy flatlined in Q4 but shrank 0.5% in December, Adegbembo says:

The UK economy has narrowly avoided falling into a technical recession in 2022 based on the first quarterly estimate, but growth momentum remains weak, and we expect Q1 growth of -0.3%…..

We don’t think this quarter’s stagnation is a precursor of an upcoming pickup in growth momentum; the UK economy remains weak as evidenced by recent deterioration consumer surveys and subdued business surveys, and we expect to see the economy decline further into 2023.

UK consumer confidence has picked up as people show more optimism about their household finances, polling firm YouGov has reported.

It latest survey of the public has found that optimism rose in January, suggesting the economy performed better than feared in the early weeks of 2023.

UK consumer confidence
UK consumer confidence Photograph: YouGov

The report says:

  • Consumer confidence increased by 2.4 points in January 2023, which is the biggest single month increase since May 2021

  • Short-term (+5.7) and forward-looking (+10.5) household finance measures saw significant improvements

  • House value measures for the past 30 days (+3.7) and next 12 months (+5.8) also trended upwards

  • Business activity measures for the past 30 days fell by -2.2 points to 106.6, the lowest since February 2021

  • Confidence in job security fell further by 0.7 points

Oil price jumps as Russia announces output cut

There’s drama in the energy markets this morning.

The oil price has jumped by 2.5%, after Moscow announced it will cut oil production, in retaliate against Western sanctions following the invasion of Ukraine.

Russia will cut oil production by 500,000 barrels per day, or around 5% of output, in March, Deputy Prime Minister Alexander Novak has announced.

The move has been hinted at by the Kremlin, since the European Union and G-7 began discussing capping the price of Russian exports. At the end of December, president Putin banned the supply of crude oil and oil products to nations that impose the cap.

Novak says

“As of today, we are fully selling the entire volume of oil produced, however, as stated earlier, we will not sell oil to those who directly or indirectly adhere to the principles of the ‘price cap’.

“In this regard, Russia will voluntarily reduce production by 500,000 barrels per day in March. This will contribute to the restoration of market relations.”

This has pushed Brent crude up by $2 per barrel, to $86.60. That’s the highest since the end of January. Higher energy prices could undermine hopes of bringing inflation down sharply this year.

Analyst: No need to open the fizz after UK avoids recession

The sparkling wine can remain on ice after data this morning confirmed the UK avoided a recession at the end of 2022 by the narrowest of margins, cautions Craig Erlam, senior market analyst at OANDA.

There’s every chance that a tiny revision to the data over the next couple of months will confirm quite the opposite, Erlam adds:

Ultimately, this isn’t a story of whether the UK is in recession or not as that’s just a simple technical definition. It’s a story of zero growth - quite literally in the case of the fourth quarter - and the fact that this likely represents the recent past, present, and near-term future prospects for the UK economy. High but falling inflation and basically no growth for some time. It’s all a bit bleak really.

Of course, that’s better than where we expected to be at this point so that’s a positive. The data towards the end of the year is actually quite difficult to pick apart due to the impact of one-off or temporary events like the world cup, the loss of premier league football, and most importantly, the many, many public sector strikes that continued into the new year.

Updated

Is Jeremy Hunt right that the UK economy is more resilient than expected?

Luke Newman, UK equities portfolio manager at Janus Henderson Investors, agrees -saying consumer spending could have been stronger than feared.

The UK economy continues to display more resilience than feared with a technical recession avoided despite the headwinds created by the series of public sector strikes, which if adjusted for would actually suggest some underlying economic growth over the quarter.

The message we are receiving from domestic consumer facing businesses is that the expected collapse in household spending following Christmas has simply not occurred, and whilst it is too early to call a significant reverse in trend, it does appear as if the UK consumer is in better shape than most economists’ forecasts had suggested following an easing in the headline rates of inflation and some signs of stability in energy markets.

But, as Hunt also hints at, 2023 will be tough.

Tommaso Aquilante, associate director of economic research at Dun and Bradstreet, warns that businesses will face heavier pressures:

“Growing by 4%, the UK economy has proven more resilient than expected in 2022. And yet there is clear evidence of weakening in economic activity, which has stagnated in the fourth quarter. The economy has avoided a recession by just a whisker, but it’s likely to be flirting with one in 2023, and consequently, there are challenges ahead for businesses.

“Credit risk has increased significantly, with business liquidations being consistently above pre-pandemic levels for a while. Businesses are going to have to be exceptionally diligent when managing their financial pipeline. To better serve customers and preserve cash flows and ensure businesses are resilient to the challenges ahead, a comprehensive monitoring of risks and opportunities along product lines and supply-chain ramifications is essential.”

When counting to two decimal places, the UK eked out a tiny 0.01% growth in the final quarter of last year, PA Media points out.

These figures might be revised in late March when the ONS next looks at GDP, though.

One piece of good news in today’s GDP report is that that UK economy shrank by less than thought over the summer.

The Office for National Statistics now estimates that UK GDP fell by 0.2% in July-September, better than the 0.3% fall in Q3 GDP it estimated in December.

UK GDP revisions

The ONS says these revisions can be due to the replacement of forecasts with actual survey or external source data and new seasonal adjustment factors.

Activity in the UK’s legal profession picked up in December, by 3.1%, today’s GDP data shows.

Although that helped keep the country out of a technical recession, it may be a worrying sign – if it’s due to legal disputes over debts, or insolvencies (which jumped last year)

Steven Mather, director and lawyer at Leicester-based Steven Mather Solicitor, predicts a rise in insolvencies in 2023.

“Lawyers were busy during the fourth quarter as the storm clouds gathered. We’ve seen a significant uptick in business clients needing debt recovery, which doesn’t bode well for the economy.

In good times, a business can often overlook a £20k debt or even a £100k debt, but when the economy gets tighter, they start looking at their aged debtors and push harder for payments. Getting on top of aged debt can really help your cash flow but, as the chain upwards may be struggling with cash flow, too, it’s not necessarily easy to get paid.

Sadly it’s sometimes the one who shouts loudest who gets paid first. I’m fully expecting insolvencies to increase hugely this year. The issue with insolvency is that there’s often a whole chain of small businesses below as suppliers who are hung out to dry with no likelihood of getting paid which puts pressure on them to pay staff and keep the economy going.”

Tahina Akther, barrister and co-founder at London-based Wildcat Law, has seen a rise in businesses looking to exit contracts, or considering filing claims for damages under contract clauses.

“Financial legal disputes, which kept lawyers busy in December, are usually a forerunner of a full recession and we saw a spike in enquiries coming through during the final quarter of last year.

The news that Britain narrowly dodged falling into recession at the end of last year hasn’t brought much cheer to the City of London.

The pound is little changed, around $1.211 against the US dollar. It fell to a one-month low below $1.20 earlier this week.

The UK’s blue-chip share index, the FTSE 100, has hit several record highs this week. Today, though, it’s down 0.15% at 7898 points.

Banking group Standard Chartered are the top FTSE 100 faller, down 4.6%, after the UAE’s largest bank, First Abu Dhabi Bank, insisted it is not evaluating a takeover offer (reports yesterday of a possible bid drove Standard Chartered up).

The Resolution Foundation agrees that the UK economy is not yet “out of the woods”, after flatlining in the last quarter.

James Smith, research director at the Resolution Foundation, points out that families are still living through a living standards downturn.

“The longer-term picture is more worrying, with the UK economy yet to return to its pre-pandemic size having suffered a prolonged period of weak growth since the financial crisis.

“However, falling wholesale gas prices offer hope for households and the wider economy – with inflation on track to fall sharply later this year.”

Video: Hunt says UK economy has underlying resilience

Here’s a video clip of chancellor Jeremy Hunt responding to today’s GDP figures.

As flagged earlier, he welcomes the news that the UK has avoided a technical recession and was the fastest growing G7 economy last year (at 4%, compared to 2.1% for the US and Germany’s 1.9% growth).

Inflation is still much too high, Hunt warns, and causing pain to families across the country. That’s why the government must stick to its plan to half inflation this year, he says.

[that plan includes not paying inflation-beating pay rises to public sector workers].

Controlling the cost of living is the Bank of England’s job, of course – and the BoE has already forecast that inflation will fall sharply this year.

Hunt adds that the UK can be “one of the most prosperous countries in Europe”, if it plays to its strength in science and technology.

Yesterday, though, the boss of pharmaceuticals giant AstraZeneca said the UK’s “discouraging” tax regime had deterred it from building its new $360m ‘state-of-the-art’ manufacturing plant in Britain. It went to Ireland instead.

Updated

Dodging recession is welcome news, but it doesn’t mean the UK economy is in great shape, of course.

Alfie Sterling, chief economist at the New Economics Foundation, shows here how UK GDP is still below its pre-pandemic levels, after three troubled years:

The 0.5% drop in UK GDP in December was partly caused by the widespread industrial action across the country at the end of 2022, says Martin Beck, chief economic advisor to the EY ITEM Club.

Beck explains:

Widespread industrial action probably explains a large part of December’s fall in activity. There is likely to have been a substantial direct impact on some sectors. For example, shutdowns across the rail network will have weighed heavily on output in the transport sector.

There’s also likely to have been an indirect impact from the transport disruption, both in terms of stopping people getting to work and compromising their ability to engage in leisure activities.

EY ITEM Club, a forecasting group, thinks GDP may dip further in the first half of 2023.

The cost of living squeeze, higher interest rates, and tax increases will all hit growth, as Beck says:

The ongoing squeeze on household spending power from high inflation will weigh on consumer spending, while the combination of pressure on profitability and the uncertain outlook makes for a challenging backdrop for business investment.

In addition, policy settings will be tight, with a significantly tightening of fiscal policy due to be implemented from April and much of the impact of higher interest rates still to feed through.

Deloitte: we expect GDP contraction this year

Today’s GDP report is only the first estimate of what happened in the economy in the last quarter of 2022.

So there’s a risk that the report is revised in coming months, as more data comes in from across the economy, says Debapratim De, senior economist at Deloitte:

“The UK avoided a recession last year but by the slimmest of margins. Going by recent data revisions, today’s figures could well be revised downwards in a few months, painting a very different picture for growth.

“Recession or not, UK growth has stagnated for some time now. Despite the marginal improvement in sentiment over the last few weeks, we continue to forecast a contraction in GDP this year.”

The UK has dodged the technical definition of a recession by “a hair’s breadth”, says Laura Suter, head of personal finance at AJ Bell:

“The government will pounce on these figures as an example of why the IMF and other economists’ predictions of UK economic doom are too downbeat, no doubt latching onto the fact that we’re not in a technical recession. And, perhaps more worryingly for the UK public, the Bank of England may well see this as a sign that they can go higher and harder with rate rises at their next meeting.

“Why does a recession matter to the UK public? Recessions brings slower growth from many companies, meaning fewer pay rises and the potential for job losses as businesses struggle.

While the jobs market is still pretty tight, many of those effects could still be felt despite dodging a technical recession.”

Reeves: Britain’s economy is stuck in the slow lane

Britain’s economy is stuck in the slow lane and working people are paying the price, says Labour’s shadow chancellor, Rachel Reeves.

She explains:

“Today’s figures show us how – despite Britain’s great potential – our economy is stuck in the slow lane,” she said.

“We can be a leader in the industries of the future that will help grow our economy.”

“And we must bring in urgent measures to prevent yet more harm from the cost-of-living crisis, using a proper windfall tax on oil and gas giants to stop the energy price cap going up in April so that people have more money in their pockets.”

Updated

RSM: UK still faces recession in 2023

The worst is yet to come for the UK economy, with consumer spending is likely to falter this year as the squeeze on household real incomes intensifies, one economist warns.

Thomas Pugh, economist at audit, tax and consulting firm RSM UK, predicts that UK GDP will contract in the first half of this year – meaning a recession this year.

And while it may be milder than the Bank of England feared a few months ago, that would encourage the central bank to raise interest rates again soon to 4.25%, he predicts.

Pugh says:

‘The UK has avoided falling into recession by the skin of its teeth, but the worst is yet to come. There are clear signs that the economy has deteriorated over the last few months, GDP fell by 0.5% in December after growing by 0.1% in November.

The combination of double-digit inflation, the huge rises in interest rates over the last year and less fiscal support means households real disposable incomes are set to shrink sharply in the first half of this year. That will lead to falling consumer spending and a shrinking economy. As a result, we think the recession has just been delayed rather than cancelled.

‘Of course, narrowly avoiding a recession doesn’t change much on the ground. For businesses operating in the real economy a rise in GDP of 0.1% doesn’t feel much different to a drop in GDP of 0.1%. But a milder recession would mean that unemployment rises more slowly, wage growth stays strong and domestically generated inflation falls at a slower pace than expected.

This could result in the Bank of England (BoE) raising rates by more than expected.

Despite the typical seasonal boost to spending around the Christmas period, December suffered a sharp economic sharp contraction which meant that the UK economy logged zero growth during the final quarter of 2022, says Victoria Scholar, head of investment at Interactive Investor.

December’s growth was negatively impacted by industrial action across the UK with postal strikes, a hit to public services and lower school attendance. On top of that the Premier League football’s pause for the FIFA World Cup also had a negative impact on UK GDP. Lingering double-digit inflation also continues to weigh on consumer confidence, spending and business margins.

The Bank of England has recently rolled back its highly pessimistic forecasts from last year for the UK economy to face the longest recession since records began. Instead in the final quarter of 2022, it was projecting growth of 0.1%, which the official data just fell short of this morning.

Although the UK managed to technically stave off a recession, the growth picture remains bleak weighed down by industrial action and sky-high inflation which is driving the cost-of-living crisis for consumers and a cost of doing business crisis too. The UK central bank is in the unenviable position of trying to raise interest rates to the extent that price pressures cool without inadvertently tipping the economy into a recession.

Today’s GDP report includes some “worrying developments”, warns David Bharier, head of research at the British Chambers of Commerce.

Bharier points out that output in the production sector shrank in the last quarter.

He says companies were hit by high energy prices, and also face headwinds including continuing strike action and further uncertainty around Britain’s trading relationship with Europe.

Production output fell by 0.2% in Q4 2022, eight of the 14 service sectors saw contractions, and monthly GDP fell by 0.5% in December.

“Small businesses have seen three years of economic shocks, including lockdowns, global supply chain crises, Brexit, and soaring energy costs.

“Our research has shown that most small firms have seen no improvements to sales, exports, or investment. Retailers and hospitality firms are among the worst affected as consumer confidence takes a hit.

ONS: anecdotal evidence that strikes hit economy

There is “anecdotal evidence” to suggest that industrial action had an impact across a wide range of industries in December, the Office for National Statistics says.

In its December GDP report, the ONS says there is anecdotal evidence to suggest that rail strikes had negatively impacted some businesses.

Most comments were received from restaurants, caterers, hotels and bars, but other affected units included those engaged in the manufacture of jewellery, the wholesale of food, beauty treatments and the wholesale of wine. Units involved in car hire and in land transport reported an increase in turnover because of the rail strikes.

There was also anecdotal evidence that postal strikes had negatively impacted some businesses, the statistics body explains:

The units affected included businesses engaged in financial planning, hospitality, computer repair, and management consulting.

Other units affected include those involved in the manufacture of metal doors and windows, blankets and jewellery and the wholesale of flowers, watches, garden furniture, computer equipment, optical equipment, motor vehicle parts, and households’ goods.

Royal Mail staff began a series of days of strike action in early December, in a dispute over pay and conditions.

Updated

UK escapes recession "by the skin of its teeth"

The UK has escaped recession by the skin of its teeth, says Jeremy Batstone-Carr, European Strategist at Raymond James Investment Services.

Batstone-Carr points out that the cost of living crisis will continue to hit households this year:

Today’s figures confirm that the UK has escaped recession by the skin of its teeth in 2022. With December’s contraction of 0.5%, skirting recession by the slimmest of margins, the UK has achieved a minor economic victory.

November’s 0.1% growth came as a significant surprise, with England’s footballers providing sufficient cheer to temporarily offset the negative effects of elevated inflation and rising rates. But the footballers have now packed up and come back home, bringing an end to this economic reprieve.

We are still in for the downturn which so far has been barely kept at bay. It will be shorter and shallower than previously thought, as per the Bank of England’s forecasts. The lagged impact of earlier base rate increases combined with additional policy tightening will ensure it happens.

However, whether we are officially in recession will not make much difference to most people – it will simply feel like a continuation of the present sluggishness and cost-of-living woes.

Full story: UK narrowly avoids recession after figures show growth flatlining

The UK narrowly avoided entering a recession at the end of last year, official figures reveal, after economic growth was flat in the final three months of 2022, my colleague Phillip Inman reports.

However, the economy did contract in December, as feared – by 0.5% - following a growth figure of 0.1% in November and 0.55% in October.

Negative growth in the fourth quarter would have signalled recession, after the economy shrank by 0.3% in the third quarter, according to the figures from the Office for National Statistics. A technical recession is generally defined as two consecutive quarters of negative growth.

With the cost of living crisis eating into household spending power and many small businesses struggling to stay afloat, few economists expected a strong performance in the run-up to the festive season.

Here’s the full story:

Jeremy Hunt says economy is more resilient than feared

Chancellor Jeremy Hunt says has warned that the UK economy is not out of the woods, after narrowly swerving a recession in the last quarter.

Hunt says the economy is showing more resilience than expected, pointing out that the UK’s 4% growth during 2022 is faster than other advaned economies.

He says:

“The fact the UK was the fastest growing economy in the G7 last year, as well as avoiding a recession, shows our economy is more resilient than many feared.

“However, we are not out the woods yet, particularly when it comes to inflation.”

UK GDP report
UK GDP report Photograph: ONS

Updated

UK shrank 0.5% in December alone

Britain’s service sector had a rough December.

Services sector GDP shrank by 0.8% in December alone, today’s flurry of GDP data shows, which helped to drag the wider economy down by 0.5% in December.

UK GDP to December 2022

Strikes and the postponement in Premier League football both hit the economy in December.

Darren Morgan, director of economic statistics at the Office for National Statistics (ONS), says:

“The economy contracted sharply in December meaning, overall, there was no growth in the economy over the last three months of 2022.

“In December public services were hit by fewer operations and GP visits, partly due to the impact of strikes, as well as notably lower school attendance. Meanwhile, the break in Premier League football for the World Cup and postal strikes also caused a slowdown.

“However, these falls were partially offset by a strong month for lawyers, growth in car sales and the cold snap increasing energy generation.

“Across 2022 as a whole, the economy grew 4%, Morgan adds:

Despite recent squeezes in household incomes, restaurants, bars and travel agents had a strong year.

“Meanwhile, health and education also began to recover from the effects of the pandemic.”

On a quarterly basis, the UK economy was still 0.8% below its pre-coronavirus level, today’s GDP report shows.

UK GDP

That makes the UK the only G7 country that hasn’t recovered all the lost output due to Covid-19, Bloomberg points out:

Updated

For 2022 at a whole, UK GDP increased by an estimated 4.0%, following a 7.6% increase in 2021, the Office for National Statistics says.

ONS: UK avoids falling into recession

Newsflash: The UK has avoided falling into recession at the end of last year.

The Office for National Statistics reports that UK GDP was flat in the last quarter of 2022, as economists had expected.

That follows a 0.2% contraction (revised up from -0.3%) recorded in the third quarter of last year, meaning Britain has avoided the technical definition of a recession – two consecutive quarters of contraction in a row.

But, the economy did contract in December, as feared, by 0.5%.

The ONS says:

  • The first quarterly estimate of UK real gross domestic product (GDP) shows there was no growth in Quarter 4 (Oct to Dec) 2022.

  • Monthly estimates published today show that GDP fell by 0.5% in December 2022, following an unrevised growth of 0.1% in November 2022.

  • In output terms, the services sector slowed to flat output on the quarter driven by falls in the education, and transport and storage sub-sectors.

  • Elsewhere, growth of 0.3% in construction was offset by a 0.2% fall in the production sector in Quarter 4 2022.



Updated

Any relief if the UK has avoided recession at the end of last year will be short-lived, fears Adam Cole, chief currency strategist at RBC Europe.

Cole predicts the economy will shrink in the current quarter:

The monthly GDP outturns for October and November and December mean that the UK economy likely avoided a recession in calendar year 2022, if only just.

Relief is likely to be short lived, however. The January PMI surveys suggested that activity weakened at the beginning of Q1 2023 and we currently see GDP contracting by 0.3% q/q.

How GDP measures everything except that which makes life worthwhile

Today’s GDP reportwill give a closely watched healthcheck on the UK economy.

It will estimate how much (if any) economic growth was achieved, based on the value of all the goods and services that were produced, during the last quarter of 2022 and also just in December.

Gross domestic product is an imperfect measure, though, some economists say. It fails to capture concepts such as well-being, or to distinguish between harmful activities and beneficial ones.

In 1968, Robert Kennedy gave a famous rebuttal of GDP, saying it measures everything “except that which makes life worthwhile.”

Kennedy explained, in an excellent, witty speech to the University of Kansas during his presidential run, that:

It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children.

Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.

It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country.

Here’s a clip of the speech, given three months before Kennedy’s assassination:

Sunak and Hunt to meet business leaders for talks on boosting economy

Rishi Sunak and Jeremy Hunt will host some of the UK’s most prominent industry leaders today as part of a drive to drum up fresh investment to revive the UK’s struggling economy.

The prime minister, who is expected to attend remotely, and the chancellor will address 200 business executives – including many of the 42 bosses from commerce and industry who sit on the UK Investment Council – with a focus on creating jobs in hi-tech sectors.

Council members include executives from Airbus, HSBC, Nestlé, Nissan and Hutchison Whampoa, which owns the 3 UK mobile telephone network. The head of Saudi Arabia’s Public Investment Fund, the outgoing Legal & General CEO Sir Nigel Wilson and Liv Garfield, the Severn Trent CEO are also expected to attend.

The government said the event would build on the success of the inaugural Global Investment Summit in October 2021, which brought together more than 170 chief executives “to showcase the UK’s commitment to green investment ahead of Cop26”.

More here:

Deutsche Bank’s chief UK economist, Sanjay Raja, has predicted that the UK economy flatlined in the last quarter of 2022.

If he’s right (and we find out at 7am), then a technical recession will have been avoided.

But, Raja fears the UK is still in the middle of a downturn.

He told clients this week:

December GDP, we think, will shrink by 0.4% m-o-m, driven by broad-based weakness across construction, manufacturing and services sectors.

Why the steeper fall in December? Weather disruptions and labour disputes will likely push GDP a bit lower. Still very subdued sentiment will also continue to keep demand fairly weak to end the year. If our forecasts are broadly on the mark, 2022 GDP growth will land at 4.1%, with the UK registering its third-fastest expansion since 2000.

Where to now? While the UK may have just about avoided a technical recession in Q4-22, the UK is still very much in the middle of a downturn.

We also continue to think that a 2023 technical recession is very likely, with GDP contracting in both Q1 and Q2. Peak-to-trough, we see GDP down around 0.5%, before registering some modest growth in H2-23. Overall, we see UK GDP shrinking by 0.5% this year and growing 0.8% next year.

The UK economy surprised us a month ago with modest growth (+0.1%) in November, as pubs and bars enjoyed a boost from the men’s World Cup.

The football could have helped the economy grow in December too, says analyst Michael Hewson of CMC Markets this morning:

Tour operators and reservation services were positive contributors to November GDP with gains of 3.7% as people booked holidays for next year.

Working on the rather unscientific basis that the World Cup ended on 18th December, and England went out on the 10th there is the prospect that we might have avoided a Q4 contraction and thus avoided the “R” word, even when taking into account the disruptive nature of the strike action which disrupted peoples travel and shopping plans.

Introduction: UK GDP report to show if UK avoided recession.

Good morning. Today we discover if Britain avoided falling into recession at the end of last year.

The Office for National Statistics will release its first estimate of UK GDP for December, and for the final quarter of 2022, at 7am this morning.

If the economy shrank in October-December, then the UK will be in a technical recession – defined as two quarters of contraction in a row. UK GDP has already shrunk in the July-September quarter, by 0.3%, so a second quarterly fall in activity would mean a recession.

But… experts predict that the economy probably stagnated in Q4, with no growth, as the UK was hit by soaring inflation, the energy price squeeze, and strikes on the railways, within the health services, and beyond.

If GDP is flat, then the recession will have been dodged – for now anyway.

Samuel Tombs at City firm Pantheon Economics said he thinks that GDP hit 0.0% growth in the last three months of 2022.

In a research note this week, Tombs explained:

“Heavy snow in mid-December appears to have hit retail sales and construction output. In addition, the hospitality sector struggled during December’s rail strikes.

“Meanwhile, surveys suggest that manufacturing output continued to fall.”

We already know that the UK economy grew in October and November, as activity picked up from September when there was a bank holiday for Queen Elizabeth’s funeral.

For December alone, the UK economy is forecast to have contracted by 0.3%, following 0.1% growth in November which raised hopes a recession could be avoided in 2022.

Whatever happened at the end of 2022, it’s clear that 2023 will be tough – with some forecasters predicting the UK economy will contract this year.

However, earlier this week, the National Institute of Economic and Social Research (NIESR) said it expects the UK to avoid a protracted recession this year. But, high inflation means it will still “feel like a recession” at least for seven million of the poorest households, NIESR said.

The IMF predicted last week, though that Britain will be the only major industrialised country to see its economy shrink this year.

The agenda

  • 7am GMT: UK GDP report for December, and the fourth quarter of 2022

  • 7am GMT: UK trade balance for December

  • 9.30am GMT: UK business investment figures for Q4 2022

  • 10.30am GMT: Russia’s central bank sets interest rates

  • 3pm GMT: University of Michigan index of US consumer sentiment

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Dick Van Dyke makes rare social media appearance to endorse US Presidential candidate
'Mary Poppins' star Dick Van Dyke, 98, has made a rare social media appearance to pledge his support to Kamala Harris in the US Presidential race, and he did so by reciting a speech he delivered alongside Martin Luther King Jr. at a 1964 civil rights event.
BANG Premier
BANG Premier
Rihanna Showed Off Her Glossy Waves With The Blunt Bob of My Dreams
Fall hair inspiration at its finest.
Marie Claire
Marie Claire
Keanu Reeves confesses to throwing up during John Wick stunts
Keanu Reeves has revealed that he relished the challenge of filming the 'John Wick' movies.
BANG Premier
BANG Premier
Quincy Jones changed my life, says Oprah Winfrey
Oprah Winfrey has explained how Quincy Jones changed the course of her life.
BANG Premier
BANG Premier
Coca-Cola brings back nostalgic Mexican soft drink
Coca-Cola makes a major announcement about bringing back a beloved Mexican soft drink to U.S. stores.
The Street
The Street
Influencer Who Filmed 'Hot Take' Interview with Kamala Harris Reveals Why He Never Published It
Influencer Kareem Rahma declined to publish his interview with Kamala Harris, finding it "boring."
Latin Times
Latin Times
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.
Download on the AppStore Get it on Google Play