Britain may have entered what experts say could be the longest recession in a century, as official statisticians said the economy shrank by 0.2% between July and September.
The Office for National Statistics (ONS) said gross domestic product (GDP) fell by 0.6% in September, partly due to the Queen’s funeral.
It added a fall of 0.2% over the quarter, lower than expected, as the ONS revised its estimates for July and August.
They are the biggest quarterly and monthly falls since the start of 2021, when the UK returned to lockdown to combat the Covid-19 virus, the ONS said.
If the economy also contracts in the last three months of this year – as experts predict – it would push the economy into a recession that could last for two years.
It would also be the first time since 1975 that the UK has moved from one recession to another so quickly, economists at the Resolution Foundation said.
Research director James Smith said: “Falling consumer spending has caused the economy to contract in the third quarter of 2022.
“This has put Britain on course for the fastest return to recession in almost half a century.”
The ONS said around half of this drop in September was due to the Queen’s Funeral Day holiday.
Unlike most other public holidays, there was no boost to restaurants, pubs and tourist attractions on that day, as most businesses were closed or reduced their opening hours.
The ONS’s director of economic statistics, Darren Morgan, said: “With September showing a notable drop, partly due to the effects of the extra bank holiday for the Queen’s funeral, overall the economy it decreased slightly in the third quarter.
“The quarterly decline was driven by manufacturing, which experienced broad-based declines across most industries.
“Services were broadly flat, but consumer-oriented industries fared poorly, with retail sales noticeably down.”
The reading comes just a week after the Bank of England issued a forecast warning that the UK could be headed for an eight-quarter recession, the longest consecutive recession since reliable records began in the 1920s.
However, the Bank warned that this would only happen if it raised interest rates to around 5.2%, which the market expected at the time.
He said he does not expect rates to reach that high, implying the recession could be less prolonged.
The September figure was worse than expected: analysts had forecast a 0.5% drop for the month, according to Pantheon Macroeconomics.
“We are not immune to the global challenges of high inflation and slow growth driven in large part by Putin’s illegal war in Ukraine and his weaponization of gas supplies.”
chancellor @Jeremy_Hunt responds to the current GDP statistics of the @ONS. pic.twitter.com/me9Rt54f59
— HM Treasury (@hmtreasury) November 11, 2022
However, the ONS modified its August and July readings, helping the quarter as a whole. The economy was previously thought to have contracted by 0.3% in August, but this was revised down to 0.1%.
In July, the economy was previously thought to have grown by 0.1%, but the ONS changed this to 0.3%.
Chancellor Jeremy Hunt said: “We are not immune to the global challenge of high inflation and slow growth driven in large part by (Vladimir) Putin’s illegal war in Ukraine and his weaponization of gas supplies.
“I am under no illusion that there is a difficult road ahead, one that will require extremely difficult decisions to restore confidence and economic stability.
“But to achieve long-term sustainable growth, we have to control inflation, balance the accounts and get the debt down. There is no other way.”
Shadow chancellor Rachel Reeves said the latest GDP figures were “extremely worrying”.
The Labor MP said: “Today’s figures are another page of failure in the Tories’ growth record, and the reality of that failure is that household finances are shrinking, British businesses are being left behind and more anxiety about to the future
NEW: GDP figures show the UK economy shrank by 0.2% in the third quarter.
This is extremely worrying, and is another page of failure on the Conservatives’ record.
Britain has a lot of potential for growth.
The Green Labor Prosperity Plan and our partnership with businesses will unlock this.
— Rachel Reeves (@RachelReevesMP) November 11, 2022
“We are already near the bottom of the global growth league tables, but all the Tories are offering once again is austerity.
“The UK has a lot of potential to grow. We have the talent. We have the capacity.”
The Federation of Small Businesses said its members are particularly vulnerable to downturns in the economy.
National chairman Martin McTague said: “The fall in GDP is a headline figure made up of countless pieces of disappointing news for small businesses across the country – a new site or premises they couldn’t open, a contract that ended unexpectedly, a staff member. they had to let go.”
