Chancellor optimistic despite UK economic contraction and recession concerns (Image: Getty)
Jeremy Hunt insisted the economic outlook is more optimistic than official records suggest after fears the UK is falling into recession.
Revised figures show the economy shrank by 0.1 per cent over the summer after previous estimates indicated growth had flatlined.
A contraction over autumn would mean the country is technically in recession.
But the Chancellor said the wider picture is less bleak than the data suggests.
He said: “The medium-term outlook for the UK economy is far more optimistic than these numbers suggest. We’ve seen inflation fall again this week, and the OBR expects the measures in the Autumn Statement, including the largest business tax cut in modern British history and tax cuts for 29 million working people, will deliver the largest boost to potential growth on record.”
Gross domestic product fell by a revised 0.1 per cent against the zero growth initially estimated for July to September, the Office for National Statistics found.
It also flatlined during spring despite estimates of 0.2 per cent growth.
The revised figures come after a 0.3 per cent in October, a worse reading than economists had predicted.
A technical recession is classed as two consecutive quarters of negative growth but the figures confirming if Britain has slipped into one will not be known until February.
Industries including film production, engineering and design and telecommunications showed a weaker performance during the third quarter than statisticians initially thought.
Darren Morgan, director of economic statistics at the ONS, said: “The latest data from both our regular monthly business survey and VAT returns show the economy performed slightly less well in the last two quarters than our initial estimates.”
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“The broader picture, though, remains one of an economy that has been little changed over the last year.”
“The latest VAT data, which takes a little time to receive and process means we now estimate the economy showed no growth in the second quarter, with weaker performances from smaller businesses, particularly those in both hospitality and IT than first shown.”
“We also now estimate the economy contracted slightly in the third quarter, when we previously reported no growth, with later returns from our business survey showing film production, engineering and design and telecommunications all performing a little worse than we initially thought.”
Prime Minister Rishi Sunak made growing the economy one of his five pledges in January.
Last month, he met the first of his promises when inflation fell to below half of the 11 per cent it was at the start of the year when it dropped to 4.6 per cent.
In a further boost this week, the rate plunged further than expected to 3.9 per cent.
It raised expectations in the City that the Bank of England will make a series of interest rate cuts next year after imposing 14 consecutive rises from December 2021.
But economists warned the PM will find it tough to meet his promise to grow the economy.
READ MORE Bank of England ‘out of touch’ as GDP decline shows base rate hiked too slowly
Richard Carter, head of fixed interest research at Quilter Cheviot, said: “Growth is weakening and interest rates are really beginning to bite, and while a recession has just been avoided to date, there is no guarantee one will be avoided in 2024.”
He added that “Rishi Sunak’s pledge to grow the economy is now severely in doubt”.
Ellie Henderson, an economist at Investec Economics, pointed out that while a winter recession is now more probable, it is a “matter of semantics”.
“But she said the “story remains that economic growth has been subdued”.
Martin Beck, chief economic adviser to the EY Item Club, said: “October’s decline in GDP, the growing drag from past rises in interest rates, and industrial action holding back activity in some sectors mean the economy in the fourth quarter is likely to flatline at best, with a technical recession a serious possibility.”
Despite promising to grow the economy, the ONS has just revealed GDP actually fell over the Summer and Autumn.
Rishi Sunak is under fire for failing to meet yet another of his five key pledges, after official figures showed the UK economy actually shrank between July and September this year. The Office for National Statistics (ONS) revised its original estimate that GDP grew by 0.2 percent in Quarter 2 of the year, saying the economy actually showed no growth during the period.
In Quarter 3, they originally calculated that GDP stayed stagnant on +0 percent, however they’ve also revised that down to show the UK economy shrank by 0.2 percent during the three month period.
“However, prospects for 2024 are improving. Inflation is falling faster than had been expected and declines in wholesale gas prices point to a cut in energy bills in the spring, implying a better consumer outlook.”
“So, a worse-than-expected performance this year should be balanced by a better outlook for 2024 and 2025.”
“UK Consumer Prices Index inflation fell to 3.9 per cent in November, its lowest level for more than two years and driven by a fall in fuel prices.”
Ashley Webb, economist at Capital Economics, suggested the “mildest of mild recessions started” in the summer and growth is expected to “remain subdued throughout 2024.”
Labour shadow chancellor Rachel Reeves said: “Rishi Sunak is a Prime Minister whose legacy is one of failure. He failed to beat Liz Truss, he failed to cut waiting lists, he failed to stop the boats and now he has failed to grow the economy.
“Thirteen years of economic failure under the Conservatives have left working people worse off with higher bills, higher mortgages and higher prices in the shops.”
