According to revised numbers, the economy of the United Kingdom shrank by a greater amount than was initially believed in the three months leading up to September.
According to the Office for National Statistics (ONS), business investment did not perform as well as was initially assumed, which contributed to the GDP contracting by 0.3% rather than the 0.2% that was previously estimated.
The expansion estimates for the first half of 2022 have also been brought down to a lower level.
As a result of the negative impact that rising prices would have on growth, it is anticipated that the United Kingdom will enter a recession in the last three months of the year.
When a nation’s economy experiences a decline in size for consecutive periods of three months (also known as quarters), the nation is said to be in a recession. Companies typically make less money, pay decreases, and unemployment rates rise, which leaves the government with less money in tax revenue to use on public services.
“Our revised estimates suggest the economy performed slightly less well over the last year than we originally thought,” said Darren Morgan, director of economic statistics at the ONS. “The manufacturing sector performed considerably worse,” he said.
In addition, he stated that household incomes had continued to decline, even after taking into account the impact of rising prices, and that household expenditure had “declined for the first time since the conclusion of the COVID-19 shutdown in the spring of 2021.”
The Office for National Statistics (ONS) reported that the current estimate for the gross domestic product (GDP), which is a measure of the size of the economy, was now estimated to be 0.8% lower than where it was before the pandemic struck, which was a downward revision from the previous estimate, which was 0.4% lower.
The economy has taken a hit as a result of rising oil and food prices, which have pushed inflation to its highest level in forty years. Inflation is the rate at which prices grow.
It indicates that individuals are spending less money overall, and corporations are decreasing the amount of money they invest.
Along with its revision for the period covering July to September, the ONS stated that the economy grew less than initially estimated in the first half of the year, expanding by 0.6% in the first quarter and 0.1% in the second quarter. This was in addition to the ONS’s revision for the period covering July to September.
Previous reports from the ONS said that the rate of growth for those corresponding quarters was 0.7% and 0.2%.
Revisions to the growth estimates provided by the ONS are nothing out of the ordinary. It takes around forty days after the end of the quarter in question for it to generate a preliminary estimate of GDP. At that point, only about sixty percent of the data is accessible; therefore, the figure is amended later when additional information becomes available.
We were previously aware that the economy of the United Kingdom contracted during the third quarter of the year, although the economies of other countries grew. However, the gap between the United Kingdom and the rest of the world appears to be significantly wider than previously believed.
An economy that has only recovered to 0.8% of its pre-pandemic level stands in stark contrast to the eurozone, which has increased by 2.2% since the last count, or to Canada, which has increased by 3%.
The OECD, a think tank based in Paris, has predicted that in 2023 the economy of the United Kingdom will continue contracting by a greater amount than the economies of the other G7 countries, while other economies will return to growth.
There is accumulating evidence to suggest that at least some of the poor performance can be attributed to Brexit.
The Office for National Statistics (ONS) released numbers late last week indicating that the economy saw a contraction of 0.3% from the month of August through the month of October.
The Office for Budget Responsibility (OBR), which serves as an independent forecaster for the government, has issued a warning that the United Kingdom would enter a recession “that will last just over a year.”
According to projections made by the OBR, the economy will contract by 1.4% in 2023 before beginning a slow but steady ascent back toward recovery.
As a direct consequence of this, it anticipates that the unemployment rate will climb and that housing prices will drop significantly as a direct result of the Bank of England increasing interest rates to control surging prices.
The Federal Reserve hiked its benchmark rate to 3.5 percent last week, marking the highest level in the past 14 years. This is driving up the price of payments for consumers who have mortgages and loans.
The United States and the eurozone are both forecast to enter recession in the coming year, joining the United Kingdom as one of the countries whose economies are exhibiting signs of slowing down.
Gabriella Dickens, an economist at Pantheon Macroeconomics, predicted that the United Kingdom will “suffer the greatest recession among major advanced economies in 2023.”
The current state of the economy is being attributed by the chancellor, Jeremy Hunt, to Vladimir Putin’s invasion of Ukraine.
“The global economy is experiencing a slowdown as a result of high inflation caused by Vladimir Putin’s invasion of Ukraine.” “There is not a single nation that is safe, least of all the United Kingdom,” he remarked.
However, in response to the most recent numbers released by the ONS, Rachel Reeves, the shadow chancellor for Labour, accused the government of having lost control of the economy.
“GDP numbers have been revised down, leaving the UK with the lowest growth in the G7 in the past quarter,” she tweeted. “This leaves the UK with the worst growth in the G7 in the last quarter.”
“The Conservatives have no control over the economy, and as a result, millions of hardworking people are being forced to pay the price.”