Figures from the Office for National Statistics show that the economy has contracted by 0.3 per cent between August and October, suggesting that the UK is officially set to enter recession after Q4.
The economic contraction is largely being driven by inflationary pressures, caused by rising fuel and energy prices and the war in Ukraine.
Over August to October, economic activity in production, construction and services all slowed.
After a 0.2 per cent economic contraction over Q3 (July to September), the shrinkage between August and October suggests that the UK will officially enter recession by the end of the year having registered two consecutive quarters of decline.
The ONS’ director of economic statistics, Darren Morgan, said that ongoing industrial action had hampered businesses.
Morgan told the BBC: “We speak to about 40,000 businesses every fortnight and one in eight of them tell us they were affected by industrial action in October.
“They told us the most common impacts were they were not able to get the necessary goods or services and were unable to operate fully.”
Although the economy in October grew 0.5 per cent when looking at the month’s figures in isolation, the Bank of England has already projected that the nation is set to face the lengthiest economic downturn on record.
In November, the Bank hiked interest rates by 0.75 percentage points to three per cent and is expected to raise them to 3.5 per cent this week at its next Monetary Policy Committee meeting.
The full impact of rising interest rates on the economy is yet to be felt, according to EY Item Club’s chief economic adviser, Martin Beck.
Beck said: “The near-term outlook remains gloomy, as consumers continue to struggle under the weight of high inflation and with much of the impact of this year's interest rate rises still to be realised.”
Chancellor Jeremy Hunt has said that the figures lay bare the “very challenging economic situation here and across the world”, warning that it “will get worse before it gets better”.
However, Labour shadow chancellor Rachel Reeves said that the figures were indicative of Tory “failure” in being able to grow the economy and had left the UK “lagging behind on the global stage”.
Photo by Andre Taissin on Unsplash
