UK narrowly avoids recession as GDP shrank marginally

Britain’s economy showed zero growth in the final three months of 2022 – enough for it to avoid entering a recession for now – but faces tough prospects in 2023 as households continue to wrestle with double-digit inflation.

Monthly gross domestic product data for December – when there were widespread strikes in the public sector, rail and postal services – showed a 0.5 per cent contraction, the Office for National Statistics said, larger than the 0.3 per cent forecast.

Even so, Friday’s figures will offer some relief to Prime Minister Rishi Sunak and his finance minister Jeremy Hunt, as they seek measures to spur a rebound in their upcoming annual budget on March 15.

Output fell 0.2 per cent in the three months to the end of September – when many businesses shut briefly to mark Queen Elizabeth’s funeral – and another consecutive fall in output in the fourth quarter would have met Europe’s usual definition of recession.

The chancellor, Jeremy Hunt, said the figures underscored Britain’s resilience, adding that they showed the economy was the fastest growing in the G7 group of rich nations last year.

“The fact the UK was the fastest growing economy in the G7 last year, as well as avoiding a recession, shows our economy is more resilient than many feared. However, we are not out the woods yet, particularly when it comes to inflation,” Hunt said.

Business groups warned that the situation remained difficult, with one describing the drop in December as “brutal” and a harbinger of a difficult year ahead.

The Confederation of British Industry said a recession in 2023 was likely and the chancellor needed to take “a bolder approach to tackling labour and skills shortages and falling business investment”.

Suren Thiru, the economics director at the Institute of Chartered Accountants in England and Wales, said: “Despite skirting a technical recession for now, December’s GDP fall confirms that the economy took a nosedive at the end of 2022.

“The UK is facing a particularly brutal year, with high inflation, stealth tax rises and the lagged impact of numerous interest rate hikes still likely to push us into a summer downturn by hammering incomes and confidence.”