UK economy shrinks in third quarter as recession fears mount

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The UK economy shrank slightly in the third quarter, according to revised figures that highlight the country’s struggle to shake off its low-growth performance and raise the risk of a technical recession.

The data was published at the end of a year in which Prime Minister Rishi Sunak promised to “grow the economy”. Of his five pledges in January, only a vow to halve inflation has so far been met.

The Office for National Statistics said on Friday that gross domestic product fell by 0.1 per cent in the three months to September, a downward revision from previous estimates of zero growth.

The economy flatlined in the second quarter — lower than its earlier estimate of a 0.2 per cent increase.

The weak performance will further raise pressure on the Bank of England to start easing monetary policy, especially with headline inflation now at 3.9 per cent, the lowest since September 2021.

The UK economy is stuck in a lacklustre state as it struggles with high borrowing costs and the legacy of the worst inflationary upsurge for a generation.

While the prospect of further falls in inflation in 2024 could alleviate some of the pressure on households, economists still expect weak investment and low productivity growth to drag on the country’s performance.

Output fell another 0.3 per cent in October compared with September, according to official figures released earlier this month, although a separate report on Friday suggested there has been a 1.3 per cent jump in retail sales in November ahead of the key Christmas shopping period.

Further declines in overall activity would increase concerns that the UK could be heading into a technical recession, with two consecutive quarters of falling GDP.

“The national accounts release indicated an economy which is progressing slower than was first reported, making a winter recession far more likely,” said…