The Bank of England has warned that the UK is facing its longest recession since records began a century ago.
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LONDON — Britain’s economy contracted by 0.2% in the third quarter of 2022, signaling what could be the start of a long recession.
The preliminary estimate indicates that the economy performed better than expected in the third quarter, despite the slowdown. Economists had forecast a contraction of 0.5%, according to Refinitiv.
The contraction does not yet represent a technical recession – characterized by two consecutive quarters of negative growth – after the 0.1% contraction in the second quarter was revised upwards by 0.2%.
“In terms of production, there was a slowdown during the quarter for the services, manufacturing and construction industries; the services sector slowed to flat production during the quarter, due to a drop in consumer services, while the production sector fell by 1.5% in Q3 2022, including falls in all 13 sub-sectors of the manufacturing sector,” the Office for National Statistics said in his report on Friday.
The bank of england planned last week the country’s longest recession since records begansuggesting that the slowdown that began in the third quarter will likely last through 2024 and push unemployment to 6.5% over the next two years.
The country is facing a historic cost of living crisis, fueled by a squeeze in real incomes due to soaring energy and tradable goods prices. The central bank recently imposed its biggest increase in interest rates since 1989 as policymakers try to rein in double-digit inflation.
The ONS said the level of quarterly GDP in the third quarter was 0.4% lower than its pre-Covid level in the last quarter of 2019. Meanwhile, figures for September, in which UK GDP fell fell 0.6%, were affected by the holiday. for the state funeral of Queen Elizabeth II.
UK Finance Minister Jeremy Hunt will announce a new fiscal policy agenda next week, which is expected to include major tax hikes and spending cuts. Prime Minister Rishi Sunak has warned that “difficult decisions” will have to be made in order to stabilize the country’s economy.
“While some headline inflation numbers may start to improve from now on, we expect prices to remain elevated for some time, adding further demand pressures,” said George Lagarias, chief economist at Mazars.
“If next week’s budget does indeed prove ‘tough’ for taxpayers, as expected, consumption will likely be further reduced, and the Bank of England should start considering the impact of a demand shock on the economy.”
This is breaking news and will be updated shortly.