Shallow UK recession in second half of 2023
- Shunil Roy-Chaudhuri, Personal Finance and Investment Writer
- 15 February 2024
- 5 mins reading time
Data released today shows the UK economy went into recession in the second half of 2023. This was due to the impact of the higher cost of living.
A recession is typically described as at least two successive quarters of economic contraction. In this case the UK economy, as measured by its gross domestic product (GDP), contracted by 0.3 percent in the final three months of 2023. This followed on from a 0.1 percent contraction in July to September 2023.
The word ‘recession’ can be quite emotionally charged, and perhaps conjure up images of stark economic decline. But recessions vary widely and the recession of the second half of 2023 appears relatively mild: the decline for the six months as a whole amounted to just 0.5 percent.
Previous sharper declines
In contrast, the initial six-month contraction of previous recessions amounted to 3 percent in 1980 and 2 percent in 2008. The initial six-month contraction in 2020 was far higher, but this was due to the pandemic (1).
Indeed on 12 February 2024 Bank of England governor Andrew Bailey said he sees signs of an ‘upturn’ in the economy (2). And we note that unemployment is relatively low and wages have been rising higher than inflation. These factors could help drive economic growth in 2024.
Steve Mann, Head of Investment Specialists at Schroders Personal Wealth says: ‘Despite the decline in the second half of 2023, the UK grew slightly, by 0.1 percent, for the year as a whole. But this will come as little comfort for those struggling with the high cost of living. Thankfully, our economic outlook is positive for 2024 and today’s data had little impact on the markets.’
Sources:
(1) BBC (www.bbc.co.uk), ‘UK fell into recession in 2023’, 15 February 2024.
(2) Financial Times (www.ft.com), ‘Bank of England’s Andrew Bailey sees signs of “somewhat stronger” UK growth’, 12 February 2024.
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