Britain may have already entered a recession as the latest economic figures showed that the economy contracted in the reporting quarter between July and September.
In its estimate of the United Kingdom’s gross domestic product (GDP) in the third quarter, figures released on Friday from the Office of National Statistics (ONS) revealed that the economy shrank by 0.2 per cent.
During this time period, the services sector slowed to a completely flat output while the production sector contracted by 1.5 per cent, driven in part by declines in all 13 manufacturing sub-sectors.
The director of economic statistics at the ONS, Darren Morgan, said per the BBC that customer-facing businesses such as shops have also “fared badly” as the cost of living crisis has seen people curtail their spending habits. He went on to say that businesses are also facing difficulty given the rising prices of raw materials as well as increased energy costs.
The decline was sharper in the month of September, which saw a 0.6 per cent drop, however, the statistical agency attributed this to the bank holiday surrounding the State Funeral of Her Majesty Queen Elizabeth II, during which many businesses either closed down or operated on a partial basis.
The figures come after the Bank of England predicted last week that the United Kingdom is likely to enter into its longest recession in the last hundred years. The central bank forecasted that the recession would last until the middle of 2024, increasing their previous estimates which predicted a 15-month recession.
The figures from the ONS match the forecast, which suggested that the recession would officially begin in the third quarter of this year. However, as a recession is typically defined as two straight quarters of negative growth, a declaration would not occur until GDP numbers from the final quarter of the year confirm that the economy shrank again.
The Bank of England, which increased interest rates last week to 3 per cent in an attempt to fight inflation, will likely need to hike rates once again to 4.75 per cent in order to bring inflation back to its target of 2 per cent, according to the National Institute of Economic and Social Research.
This means that mortgage payers are likely to see their payments increase yet again, and the government of Rishi Sunak is planning to introduce more tax hikes.
While the British central bank was caught flat-footed in its projections on inflation and the clear impacts of the decisions to repeatedly lock down the country during the Chinese coronavirus crisis, the Bank of England attempted to blame the current inflation problems on Britons retiring early.
Chief economist for the bank Huw Pill claimed that a surge in early retirements was putting increased pressure on employers, saying: “That is a real shock to the economy, that is not something that monetary policy can prevent”.
Follow Kurt Zindulka on Twitter here @KurtZindulka