UK economy on brink of recession

The UK economy shrank by 0.2 percent between July and September as rising prices hit households and businesses hard. This could be the start of a prolonged recession, as predicted by the country’s central bank. According to data from the UK Statistics Office, the economy shrank by 0.2 percent in the third quarter. Economists surveyed by Bloomberg had predicted a 0.5 percent contraction. Consumer spending and corporate investment decreased during this period. This made the UK economy the only G7 country that has yet to fully recover from the pandemic. The economy has not yet entered a technical recession, as data for the second quarter was revised from a 0.1 percent contraction to 0.2 percent growth. The economy shrank by 0.6 percent in September alone, due to the public holiday declared for Queen Elizabeth’s funeral. The Bank of England, which has hiked interest rates eight times since December, has stated that a recession is inevitable in order to control inflation that has reached double digits. The bank's scenario suggests the recession could last until mid-2024. New Chancellor Rishi Sunak is expected to introduce tens of billions of pounds of tax hikes next week to plug public finance gaps and repair credibility after former Chancellor Lis Truss' proposed tax cuts roiled markets.