The contraction of the British economy is at the beginning of a long recession

11/11/2022 08:31

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The contraction of the British economy is at the beginning of a long recession

source:

Reuters

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View of the City of London 01/20/2021. Photograph: Hannah McKay/Reuters

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Written by William Schomberg and David Milliken

LONDON (Reuters) – Britain’s economy contracted in the three months to September, at the start of what is likely to be a prolonged recession, highlighting the challenge Finance Minister Jeremy Hunt faces as he prepares to raise taxes and cut spending next week.

Official data on Friday showed that economic output contracted by 0.2% in the third quarter, against analysts’ expectations of a contraction of 0.5% in a Reuters poll.

But it was the first drop in gross domestic product since the start of 2021, when the UK was still under tough coronavirus restrictions, as households and businesses grappled with the cost of living crisis.

Britain’s economy is now below its pre-pandemic size – it is the only G7 economy not yet fully recovered from the Covid-induced recession – and is smaller than it was three years ago on a quarterly basis.

In response to the data, Hunt reiterated his warnings that tough decisions on tax and spending must be made.

“I have no illusions that there is a difficult road ahead, a road that will require very difficult decisions to restore confidence and economic stability,” Hunt said in a statement.

“But to achieve long-term sustainable growth, we need to control inflation…and reduce debt,” he added. “There is no other way”