UK News

Threat of recession remains a concern ahead of the release of GDP figures

The Bank of England expects the UK to have narrowly avoided recession in 2022, but enter one this year (Toby Melville/PA)
August Graham, PA Business Reporter

Politicians and policy makers will find out on Friday if the UK managed to pull off a double escape from recession last year.

Experts are currently forecasting that gross domestic product (GDP) remained unchanged in the last quarter of 2022, with growth hitting 0.0%.

If that comes true, or if GDP rises, then the UK will have narrowly avoided a recession for the second time in a year.

A country is considered to be in recession of GDP shrinks for two quarters in a row. Third-quarter GDP fell by 0.3%, so any fourth-quarter fall would bring recession to the UK.

The country was spared a recession earlier in the year when the Office for National Statistics (ONS) revised its GDP figures for the second quarter.

The ONS had initially estimated a 0.1% fall in GDP between April and June, but this was later revised to a rise of 0.2%.

Samuel Tombs at research outfit Pantheon Economics said he thinks that GDP hit 0.0% growth in the last three months of 2022.

“Heavy snow in mid-December appears to have hit retail sales and construction output. In addition, the hospitality sector struggled during December's rail strikes,” he said in a note released this week.

“Meanwhile, surveys suggest that manufacturing output continued to fall.”

But even if the UK managed to escape recession again last year, it looks set to fall into recession some time in 2023.

The Bank of England, last week, predicted that the UK economy would shrink in each of the four quarters this year.

That said, the forecasts are for GDP to shrink by so little each quarter, that even a small shift could wreck the predictions.

Earlier this week, the National Institute of Economic and Social Research (NIESR) said it expects the UK to avoid a protracted recession this year.

However, high inflation means it will still “feel like a recession” at least for seven million of the poorest households, NIESR said.

According to the think tank, about one in four will be “unable to meet in full their planned energy and food bills from their post-tax income,” in the 2023-24 financial year. That is an increase from one in five the year before.

UK News