U.K. becomes 2nd G7 economy to fall into recession

globalnews.ca:

Britain’s economy fell into a recession in the second half of 2023, a tough backdrop ahead of this year’s expected election for Prime Minister Rishi Sunak who has promised to boost growth.

Gross domestic product (GDP) contracted by 0.3 per cent in the three months to December, having shrunk by 0.1 per cent between July and September, official data showed.

The fourth-quarter contraction was deeper than all economists’ estimates in a Reuters poll, which had pointed to a 0.1 per cent decline.

Sterling weakened against the dollar and the euro. Investors added to their bets on the Bank of England (BoE) cutting interest rates this year and businesses called for more help from the government in a budget plan due on March 6.

Thursday’s data means Britain joins Japan among the Group of Seven advanced economies in a recession, although it is likely to be short-lived and shallow by historical standards. Canada has yet to report GDP data for the fourth quarter.

Britain’s economy stands just one per cent higher than its level of late 2019, before the COVID-19 pandemic struck – with only Germany among G7 countries faring worse.

Sunak promised to get the economy growing as one of his key pledges to voters last year. His Conservative Party has dominated British politics for much of the past seven decades, with a reputation for economic competence. But Labour is now more trusted with the economy, according to opinion polls.

British households are due to see their first drop in living standards between one national election and the next since the Second World War, analysts have said.

Ruth Gregory, deputy chief UK economist at Capital Economics, said the GDP figures had more political significance than economic, with voters due to elect