Every Person £1,500 Worse Off as UK Enters Recession, Charity Warns
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By The Smartencyclopedia Staff  & Agencies

Date: February 16, 2024

A cost-of-living crisis has left each person in the UK approximately £1,500 worse off as the country officially entered a technical recession at the end of 2023, according to data from the Office for National Statistics (ONS). This marks the first recession for the United Kingdom since the initial half of 2020, during the onset of the COVID-19 lockdown.

While economists anticipate a short-lived recession, with gross domestic product (GDP) expected to rebound from the beginning of 2024, the Resolution Foundation’s Research Director, James Smith, highlighted the immediate impact on citizens, describing it as a “stagnation nation.”

Smith stated, “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.”

The ONS identified manufacturing, construction, and wholesale as the major contributors to the economic downturn, partially offset by increases in hotels, rentals of vehicles, and machinery.

A recession is officially declared when GDP falls for two or more consecutive quarters. The ONS estimated a 0.3% decline in GDP for the fourth quarter of 2023, following a 0.1% contraction in the preceding quarter (July to September). The fourth-quarter contraction was the most significant since the first three months of 2021, at the height of the pandemic.

The overall growth for the year was a meager 0.1%, a sharp decline from 4.6% in 2022 and the weakest growth since the aftermath of the 2009 financial crisis, excluding the pandemic-hit plunge in 2020.

The implications for the government, particularly for Prime Minister Rishi Sunak, are challenging. With a general election looming, the economic narrative becomes crucial, and a recession poses a threat to the government’s image of a robust economy. Chancellor Jeremy Hunt attributed the output fall to inflation and high-interest rates but insisted the economy was “turning a corner.”

Labour’s Shadow Chancellor Rachel Reeves quickly criticized the government, stating, “This is Rishi Sunak’s recession, and the news will be deeply worrying for families and businesses across Britain.” The Liberal Democrats accused Sunak of having “savaged the British economy.”

Economists, while acknowledging the recession, predict it to be short-lived, emphasizing the possibility of a quick recovery from the beginning of 2024. Some argue that describing the economic downturn as a recession might be overly dramatic, highlighting recent positive indicators such as rising employment and returning business and consumer confidence levels.

Joseph Rowntree Foundation chief economist Alfie Stirling cautioned that there is “no quick fix,” pointing out the challenges Britons face with “eye-watering food prices” and elevated interest rates. The impact of the recession will undoubtedly play a crucial role in shaping the economic discourse leading up to the impending general election.

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