According to new numbers, the UK economy shrunk more than first thought in the three months leading up to September.
The Office for National Statistics (ONS) said that business investment did worse than first thought. This is why the economy shrank by 0.3% instead of 0.2% as first thought.
Changes have also been made to the growth rates for the first half of 2022.
The UK will probably go into a recession in the last three months of the year because rising prices will hurt growth.
A country’s economy is said to be in recession when it shrinks for two consecutive three-month periods, or “quarters.” This is because companies usually make less money, pay goes down, and the number of people who need jobs increases. This means that the government needs more tax money to pay for services for the public.
Darren Morgan, a Director of economic statistics at the ONS said, “Our revised figures show that the economy did a little worse over the past year than we thought before.” However, he said that the way things were made could have been better.
When prices went up, he said, household incomes kept going down, and household spending went down for the first time since the last Covid-19 lockdown in the spring of 2021.
Gross domestic product (GDP), a way to measure the size of the economy, is now thought to be 0.8% smaller than before the pandemic. This is less than the last estimate, which said GDP was 0.4% smaller after the pandemic than before.
Rising prices for energy and food have hurt the economy and pushed inflation to its highest level in 40 years. The rate at which prices go up is called inflation.
It means that people and businesses are spending and investing less money.
The ONS also said that the economy grew less than first thought in the first half of the year. It grew by 0.6% in the first quarter and 0.1% in the second quarter, less than first thought.
In the past, the ONS has said that growth in those quarters was 0.7% and 0.2%.
The ONS often changes its estimates of growth. About 40 days after the end of the quarter, it gives the first estimate of GDP. Only about 60% of the data was available then, so the number changed as more information came in.
We already knew that the UK economy shrank while other economies grew in the third quarter of the year. But now it looks like the UK is even more different from the rest of the world than we thought.
An economy that is still 0.8% smaller than it was before the pandemic is very different from the eurozone, which has grown by 2.2% since the last count, or Canada, which has increased by 3%.
The Paris-based think tank OECD recently said that the UK economy would keep shrinking faster than the rest of the G7 in 2023 while other economies would start to grow again.
More and more evidence suggests the poor performance is partly due to Brexit.
From August to October, the economy shrank by 0.3%, according to data from the ONS that came out last week.
The government-independent Office for Budget Responsibility (OBR) says that the UK will enter a recession that will last just over a year.
The OBR says that the economy will shrink by 1.4% in 2023 and slowly start to grow again.
So, it thinks the unemployment rate will go up, and house prices will drop sharply as the Bank of England raises interest rates to stop prices from increasing too quickly.
The Bank raised its key rate to 3.5 percent last week. This is the highest level it has been in 14 years. This means that mortgage and loan holders will have to pay more to eliminate their debts.
The UK’s economy is one of many that is getting worse. As a result, the US and the eurozone will likely have a recession next year.
Gabriella Dickens from Pantheon Macroeconomics said that she thought the UK economy would have “the deepest recession in 2023.”
Jeremy Hunt says that Vladimir Putin’s invasion of Ukraine is why the economy is in trouble.
“Putin’s invasion of Ukraine has led to high inflation, slowing the growth of economies worldwide. No country is safe, not even Britain, “he said.
But Rachel Reeves, the shadow chancellor for Labour, said that the latest ONS numbers showed that the government was losing control of the economy.
UK economy will get worse before it gets better
After numbers showed that the economy shrank even more between August and October, Chancellor Jeremy Hunt said that things would get worse before they got better.
In the last three months, rising prices hurt businesses and families, which caused the economy to shrink by 0.3%. As a result, people think there will soon be a recession in the UK.
During those three months, the main parts of the UK economy, like production, construction, and services, slowed down.
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In his Autumn Statement, Mr. Hunt said last month that the UK was already in a recession. This should be made official when the economic numbers for October through December are made public at the beginning of next year.
When a country’s economy is in a recession, most companies make less money and the number of people without jobs increases. So even people who have finished college or dropped out of high school need help to find their first job.
Also, the government gets less money from taxes on health care and education.