The Bank of England has warned that Britain is facing its longest recession since records began a century ago.
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LONDON — Britain’s economy fell by 0.2% in the third quarter of 2022, signaling what could be the start of a long recession.
The preliminary estimate suggests 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 decline does not yet represent a technical recession – characterized by two consecutive quarters of negative growth – after the second quarter̵[ads1]7;s 0.1% decline was revised up to a 0.2% increase.
“In terms of output, there was a decline in the quarter for the services, manufacturing and construction industries; the services sector declined to flat output in the quarter driven by a drop in consumer-facing services, while the manufacturing sector fell by 1.5% in Q3 2022, including falls in all 13 sub-sectors of industry,” the Office for National Statistics said in its report on Friday.
The Bank of England last week predicted the country’s longest recession since records began, suggesting the slowdown that began in the third quarter is likely to last well into 2024 and send unemployment to 6.5% over the next two years.
The country is facing a historic cost-of-living crisis, driven by pressure on real incomes from rising energy and tradable goods. The central bank recently imposed its biggest rate hike since 1989 as policymakers sought to tame double-digit inflation.
The ONS said the level of quarterly GDP in the third quarter was 0.4% below the pre-Covid level in the final quarter of 2019. Meanwhile, figures for September, where UK GDP fell by 0.6%, were affected by the state funeral holiday of Queen Elizabeth II.
UK Chancellor of the Exchequer Jeremy Hunt will next week announce a new fiscal policy agenda, which is expected to include significant tax increases and spending cuts. Prime Minister Rishi Sunak has warned that “difficult decisions” need to be made to stabilize the country’s economy.
“While some headline inflation numbers may start to look better from now on, we expect prices to remain high for some time, adding more pressure on demand,” said George Lagarias, chief economist at Mazars.
“Should next week’s Budget prove ‘difficult’ for taxpayers, as expected, consumption is likely to be further depressed and the Bank of England should start thinking about the impact of a demand shock on the economy.
This is news and will be updated soon