UK ended 2023 in recession – consumer credit reaction

Latest GDP figures has indicated that the UK ended 2023 in recession.

The figures showed that GDP fell 0.1% in December, following a 0.2% rise in November. GDP was down 0.3% over the three months to the end of December, a second consecutive quarter of negative growth, pushing the UK into a technical recession.

The fall reflects weakness across all three major sectors of the economy.Services output fell 0.2% quarter-on-quarter whilst construction output fell 1.3% quarter-on-quarter. Production fell 1.0% quarter-on-quarter. The economy has shrunk by a total of 0.4% over the last two quarters of 2023, triggering a technical recession.

The last five recessions in the UK have all seen the economy shrink by more than 1% in their first two quarters (see figures below). The closest to this year’s figure is in fact the double-dip recession-that-wasn’t of early 2012.

The first published estimates suggested that the economy had shrunk by 0.5% in late 2011 and early 2012. But when more data came in, it turned out that the economy had actually grown by 1% in that period.

Commenting on the GDP figures, Richard Carter, CEO of Lenvi, said “The fact that the UK entered a recession in the last three months of 2023 is worrying, but inflation remaining at 4% in January will likely come as a pleasant surprise for consumers. With an increase originally predicted, the consistent rate brings hope for households and businesses that the Bank of England may begin to put forward a cut in interests, relieving some pressure and reduced costs of borrowing.

“A real turning point for the economy will be once inflation rates falls to its 2% target, but until then interest rates will remain on shaky ground. It’s obviously not ideal to see that average mortgage rates have begun to creep up in the last couple of days, following six weeks of rates falling after markets forecasting a first Bank rate cut in early summer.  But if inflation stabilises, we may begin to see sub-4% 5-year fixed rates in the near future on top of house price and mortgage rates declining.”

James Smith, Research Director at the Resolution Foundation, said “Britain has fallen into recession, and a far deeper living standards downturn. Even this weak data is flattered by a rising population. After accounting for population growth, the UK economy hasn’t grown since early 2022, and fallen far behind its pre-cost of living crisis path, with an equivalent loss of around £1,500 per person.”

“The big picture is that Britain remains a stagnation nation, and that there are precious few signs of a recovery that will get the economy out of it.”