Recent data have shown that the UK is heading towards technical recession as growth is revised down.
The U.K. is inching closer to a potential recession, with revised figures indicating a 0.1% contraction in gross domestic product (GDP) for the July to September period. This is a downward revision from the initial estimate of flat growth, as reported by the Office for National Statistics on Friday.
The preceding three months also showed zero growth, revised down from the previously calculated 0.2% growth. February’s data will reveal whether the UK enters a technical recession, defined by two consecutive quarters of economic contraction.
Finance Minister Jeremy Hunt remains optimistic, while analysts suggest that the UK has narrowly avoided a recession thus far. The economy’s weakening growth and the impact of interest rates raise concerns about the potential for a recession in 2024.
Inflation easing and revised interest rate predictions may not be sufficient to counter the economic challenges. This situation could increase pressure on the Bank of England to expedite interest rate cuts to bolster the weakening economy.
The recent surge in inflation to 3.9% in November has fueled speculation about potential rate cuts in the spring. Prime Minister Rishi Sunak’s commitment to economic growth is now in question, and the government’s success in meeting its GDP target for the final quarter of the year could influence near-term interest rate decisions.
The Bank of England’s governor, Andrew Bailey, has indicated a possible need for interest rates to remain “higher for longer,” despite holding them steady at 5.25% in the year’s final policy meeting.