Britain slides into recession, dragging down Sunak’s election hopes

London: Britain is suffering the longest hit to living standards on record, new figures show, in a hammer blow to the already slim hopes of Rishi Sunak’s Conservative government being returned at this year’s general election.

Official figures released on Thursday showed the UK entered a technical recession at the end of last year, with the economy contracting by 0.3 per cent in the three months to December after shrinking by 0.1 per cent in the September quarter.

Britain’s Prime Minister Rishi Sunak speaks with business leaders.Credit: AP

Two consecutive quarters of contracting gross domestic product – the measure of the quantity of goods and services produced – is commonly defined as a technical recession, though many economists believe stagnation is a better description absent a sharper or more sustained downturn.

GDP per head, which measures economic growth adjusted for population size, also slid by 0.7 per cent last year, marking the longest period of falling or stagnating living standards since records began in 1955.

The result is a blow to Sunak as he prepares to fight a general election this year. Economic growth is one of his government’s five flagship pledges alongside cutting immigration and cutting the hospital waiting list – now at 7.8 million, a record high.

The 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.

A man walks past empty restaurant tables in London. The UK has still not bounced back from the pandemic.Credit: AP

Sunak is also now likely to scale down plans for more tax giveaways in the budget due in three weeks.

The prime minister told chief executives gathered in Downing Street that while it was clear “global headwinds” were affecting businesses, referencing disruption in the Red Sea, where violence by Houthi rebels have caused firms to redirect shipments, he believed things were on the up.

“I’m absolutely determined to make the UK the best place in the world to start to grow and invest in businesses,” he said.

“But at the start of this year, I absolutely believe that the economy has turned the corner and we’re now pointing in the right direction.”

The data follows new analysis from Goldman Sachs this week which found post-Brexit Britain had significantly underperformed other advanced economies since the 2016 EU referendum. The investment bank estimated the UK economy had grown 5 per cent less over the past eight years than other comparable countries.

Britain’s economic growth in 2024 is forecast to outpace that of Germany and France at 0.7 per cent, according to the Organisation for Economic Co-operation and Development. However, the annual 2023 growth figure was worse than the International Monetary Fund, the OECD and the Bank of England had predicted.

Grant Fitzner, the chief economist with the Office of National Statistics warned that economic inactivity was a major factor holding back growth. The UK remains the only G7 nation yet to return to pre-pandemic employment levels.

“If more people were in work, consuming, producing, we would have higher GDP numbers,” Fitzner said.

“The fact that economic activity fell significantly post-pandemic and has only partly recovered is one of the factors underpinning weaker growth. Obviously, that would also underpin weaker consumer spending, given there are fewer people in employment and spending money.”

Labour leader Sir Keir Starmer said Sunak had failed to turn the corner on 14 years of Tory economic decline.

“Britain is hit by a recession and it’s working people who will pay the price,” he said.

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