- UK economy shrank by 0.3% in the last three months of 2023
- All sectors declined with construction under the most pressure
- Compared with 2022 UK GDP increased by 0.1% in 2023, the weakest since 2009
Danni Hewson, head of financial analysis at AJ Bell, comments on the latest UK GDP figures:
“The fact that the UK slipped into recession at the end of 2023 isn’t a surprise considering the cost-of-living crisis that hobbled us all over the year, but the size of the slump is slightly larger than had been expected.
“Constrained budgets kept us from hitting the high street in December, with retail sales figures down to a level not seen since the pandemic lockdowns of January 2021, and a series of storms also took their toll.
“That said, recession is merely nibbling at the edges of the economy and there are already signs that this slump will go down in the record books as the shortest, shallowest recession to date.
“Psychologically it is likely to take a toll and even if we accept these numbers are backwards looking and the worst may be behind us, at least for now, already shaky confidence will be knocked.
“The word recession strikes a chord with all of us. We’ve lived through other downturns and felt the impact of those on our own lives, not least the post-pandemic malaise that’s still gripping the country.
“We can understand that every recession is different and that the numbers this time suggest a limited impact, but we can’t help but be wary. And whilst other economic indicators and surveys suggest that green shoots are already springing up, the ground they’re planted in is anything but fertile.
“The UK economy has been boggy for the last couple of years and all sectors have struggled to find their feet. The big question now is how will these figures play into the Bank of England’s determination of when interest rates should start to come down?
“With construction seeing the biggest decline in output in the third quarter there is an argument to be made that hikes have already done the job they were intended to do.
“But cutting interest rates won’t be a panacea. With growth over 2023 clocking in at the weakest since the financial crisis there are no easy answers.”
