The UK economy slipped into recession last year, as evidenced by its GDP

Last year saw the UK economy slipping into a recession, as indicated by a contraction of 0.1% in GDP during the third quarter, followed by a further decline of 0.3% in the fourth quarter, according to official statistics. This economic downturn poses a significant test for Prime Minister Rishi Sunak, who faces the challenge of reassuring voters about the economy’s stability ahead of an anticipated election later in the year.

While there are signs of a somewhat stronger start to 2024, with GDP edging up by 0.2% in January and informal surveys hinting at continued growth in February and March, the recovery from the COVID-19 pandemic has been sluggish. The UK economy remains only 1% larger than its late 2019 level, with Germany being the only other Group of Seven nation to have fared worse.

Overall, in 2023, the UK economy expanded by a mere 0.1%, marking its weakest performance since 2009, excluding the sharp GDP decline in 2020 caused by the pandemic.

Looking forward, the Bank of England has indicated that British inflation is nearing a point where it might contemplate reducing interest rates. However, the Bank’s growth forecast for the year is modest, predicting a mere 0.25% expansion, while official budget forecasters anticipate a slightly higher growth rate of 0.8%. These forecasts underscore the ongoing uncertainty and hurdles facing the UK economy as it navigates the post-pandemic recovery phase.