Chancellor of the Exchequer Jeremy Hunt has warned that the UK is facing a “tough road ahead” as new data shows the economy has begun to shrink.
According to the latest release from the Office for National Statistics (ONS), the UK’s gross domestic product (GDP) shrank by about 0.2 percent between July and September.
Monthly estimates show that GDP fell by 0.6 percent in September, which was partly caused by the extra bank holiday for the state funeral of Queen Elizabeth II when many businesses closed or shortened their opening hours.
ONS director of economic statistics Darren Morgan said that the quarterly fall was driven by manufacturing, which saw widespread declines across most industries.
“Services were flat overall, but consumer-facing industries fared badly, with a notable fall in retail,” he added.
If the economy also shrinks in the final three months of this year, as experts predict, it would push the economy into a recession.
The Bank of England (BoE), the UK’s central bank, said last week that the UK could be on course for the longest recession since reliable records began in the 1920s.
‘Difficult Decisions’
Commenting on the new data, Chancellor Hunt said that the UK is “not immune from the global challenge of high inflation and slow growth,” which he mainly attributed to the war in Ukraine and Russian’s “weaponisation of gas supplies.”He said: “I am under no illusion that there is a tough road ahead—one which will require extremely difficult decisions to restore confidence and economic stability. But to achieve long-term sustainable growth, we need to grip inflation, balance the books and get debt falling. There is no other way.”
According to the ONS, the Consumer Prices Index (CPI) in the UK rose by 10.1 percent in the 12 months to September 2022.
To control inflation, the BoE has raised its base interest rate to 3 percent, the highest in 14 years, and said further hikes could be required to tame runaway inflation.
The opposition Labour Party said the latest GDP figures are “extremely worrying.”
Labour’s shadow chancellor Rachel Reeves called it “another page of failure in the Tories’ record on growth.”
The Federation of Small Businesses (FSB) said its members are particularly vulnerable to downturns in the economy.
FSB national chairman Martin McTague said: “The fall in GDP is one headline figure made up of countless bits of disappointing news for small businesses across the country—a new venue or premises they couldn’t open, a contract which ended unexpectedly, a staff member they had to let go.”
