Revisions to the figures show that the UK economy suffered a more severe contraction than originally thought.
The economy contracted by 0.3% in comparison to 0.2% previously estimated. This was due to business investment performing worse than originally thought. the Office for National Statistics (ONS) said.
Also, the growth figures for 2022’s first half have been revised.
As high prices continue to drive growth, it is expected that the UK will fall into recession during the last three months.
When the country’s economy shrinks for more than three months (or quarters) in a row, it is in recession. Companies make little money, their pay falls, and unemployment rises. This leaves the government with less tax money to spend on public services.
Darren Morgan is the director of economic statistics for the ONS. He stated that “Our revised figures indicate the economy performed slightly less well in the last year than what we previously estimated”, and that manufacturing was “remarkably weaker”.
He said that, after accounting for rising prices and household incomes, household spending continued to decline, which was the first time since the Covid-19 lockdown in spring 2021.
The ONS stated that the GDP (gross domestic product) – a measure of economic size – is now 0.8% lower than it was before the pandemic. It was downgraded from the 0.4% previously estimated.
As food and energy prices continue to rise, inflation has impacted the economy to their highest point in 40 years.
It is a sign that consumers are spending less while businesses are cutting back on investment.
The ONS also revised its July-to September period. It said that the economy grew by 0.6% and 0.1% respectively in the first quarter.
The ONS previously stated that growth was 0.7% and 0.2% respectively in these quarters.
According to the ONS, last week’s figures indicated that the economy shrank by 0.3% over the August-to-October period.
Office for Budget Responsibility (OBR), the government’s independent forecaster has warned that the UK would fall into recession for “just over a year”.
OBR predicted that the economy will shrink by 1.4% in 2023 Before growth slowly picks up again.
It expects that the unemployment rate will rise and that house prices will fall as the Bank of England raises interest rates to manage the soaring prices.
Last week, the Bank raised its key interest rate to 3.5%. This was the highest level in 14-years. This is causing a rise in repayment costs for mortgage holders and loan holders.
The UK isn’t the only country experiencing a slowdown in its economy. Both the US and the eurozone are also expected to go into recession next year.
Pantheon Macroeconomics’ Gabriella Dickens, however, stated that the UK would experience the “deepest recession” among the major advanced economies in 2023.
Chancellor Jeremy Hunt has attributed the rise in prices to the pandemic, Russia’s invasion Ukraine, and stated that there was a “clear plan” to cut inflation by next year.
Responding to the ONS latest figures, Rachel Reeves (Labour’s shadow chancellor) accused the government losing control over the economy.
“GDP data has now been reduced, leaving the UK experiencing the lowest growth in the G7 over the last quarter,” she tweeted.
“The Tories have lost control over the economy and are making millions of people pay the price.”