Written by Suban Abdullah and Andy Bruce
LONDON (Reuters) – The United Kingdom's economy has entered recession in the second half of 2023, a difficult scenario for Prime Minister Rishi Sunak, who has promised to boost growth ahead of elections this year.
GDP suffered a worse-than-expected contraction of 0.3% in the three months to December, after shrinking by 0.1% between July and September, according to official data.
A Reuters poll of economists pointed to a smaller decline of 0.1% in the October-December period.
Investors have increased their bets on the Bank of England cutting interest rates this year, and companies called for more government aid in the budget plan scheduled for March 6.
Alex Fitch, director of the British Chambers of Commerce, said: “Businesses can no longer be fooled by the difficulties they face, and this news will undoubtedly ring alarm bells for the government.”
“The Chancellor must use his Budget, in just under three weeks, to set out a clear path forward for business and economic growth.”
Chancellor of the Exchequer Jeremy Hunt said there were “signs that the UK economy is turning a corner” and “we must stick to the plan of cutting business and corporate taxes to build a stronger economy”.
The Office for National Statistics said the economy grew by 0.1% in 2023 compared to 2022. The Bank of England said it expects output to increase slightly in 2024, but by only 0.25% growth.
The UK economy has been stagnant for about two years, although recessions in the country have become increasingly rare as the economy has become larger and more mature.
The COVID-19 pandemic caused the deepest contraction ever recorded over two quarters at the beginning of 2020. Before that, the global financial crisis caused a severe recession that lasted just over a year, from the second quarter of 2008 until the second quarter of 2009. .
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