Financial experts have noted that the UK could be headed towards recession, as revised UK gross domestic product (GDP) figures from the Office for National Statistics (ONS) show that the economy contracted in the months from July to September.
The revised UK GDP figures show that the economy fell by 0.1% in Q3 (July to Sept) 2023, revised down from a first estimate of no growth.
GDP measures the overall value and health of the economy.
UK GDP is now estimated to have shown no growth in the months from April to June 2023 (Q2), revised down from a previously estimated increase of 0.2%.
According to the ONS figures, there was a 0.2% fall in the services sector in Q3, which offset a 0.4% increase in construction output and a 0.1% increase in the production sector.
However, real households’ disposable income is estimated to have grown by 0.4% following growth of 2.3% in Q2 2023.
Recession looming
Economists have noted that these figures mean that the UK may be heading towards recession and that growth is likely to stay flat in 2024.
A recession is defined as when the economy shrinks for two three-month periods in a row.
Victoria Scholar, head of investment at interactive investor said: “The UK economy shrank in the third quarter by 0.1%, falling below previous estimates for zero growth.
“There are growing concerns that the UK economy is heading towards a technical recession having now logged one of two consecutive quarters of negative growth required to meet the threshold.
“Although we have managed to avoid a recession thus far, for many it has certainly felt like we have been in one for some time amid the backdrop of elevated inflation, volatile energy prices, higher interest rates and broader cost of living pressures.”
Richard Carter, head of fixed interest research at Quilter Cheviot, agreed with the assessment, adding that the revised figures make “a winter recession far more likely”.
He added: “Growth is weakening and interest rates are really beginning to bite and while a recession has just been avoided to date, there is no guarantee one will be avoided in 2024.
“You just have to look at October’s -0.3% reading to see that growth is trending further in the wrong direction. Inflation has eased more than anticipated and interest rate predictions are suggesting more easing than originally thought in 2024, but the damage may already have been done.
“Certainly, Rishi Sunak’s pledge to grow the economy is now severely in doubt.”
