UK narrowly avoids recession after economy flatlined as Jeremy Hunt warns ‘we’re not out of the woods’

The UK narrowly avoided a recession in the second half of last year, new figures show.

Data from the Office for National Statistics (ONS) shows that the economy flatlined in the last three months of 2022, helping it to avoid a recession by the thinnest of margins.

The ONS recorded 0.0% growth in gross domestic product (GDP) in the fourth quarter - anything below zero would have pushed it into recession. The ONS said that when counting to two decimal places, the UK eked out a tiny 0.01% growth. A recession is generally defined in the UK as two quarters of declining GDP in a row and the economy contracted 0.2% in the third quarter.

In December alone the economy fell by 0.5%, partly due to strikes across the NHS, rail services and Royal Mail, and the break in Premier League football for the World Cup.

ONS director of economic statistics Darren Morgan said: “The economy contracted sharply in December meaning, overall, there was no growth in the economy over the last three months of 2022. In December public services were hit by fewer operations and GP visits, partly due to the impact of strikes, as well as notably lower school attendance.

“Meanwhile, the break in Premier League football for the World Cup and postal strikes also caused a slowdown. However, these falls were partially offset by a strong month for lawyers, growth in car sales and the cold snap increasing energy generation.”

As a whole the economy grew by 4% in 2022, the ONS said, as restaurants, bars and travel agents recovered from the Covid pandemic.

‘Not out of the woods’

Responding to the latest figures, Chancellor Jeremy Hunt warned the UK is “not out the woods yet” and stressed that the country could have some of the best growth prospects in Europe if it sticks to his plan.

He said: “Our economy is more resilient than many feared. However, we are not out the woods yet, particularly when it comes to inflation. If we stick to our plan to halve inflation this year, we can be confident of having amongst the best prospects for growth of anywhere in Europe.”

Labour shadow chancellor Rachel Reeves said the figures show the UK economy is “stuck in the slow lane” and called for more help for households with the cost of living. She said: “We can be a leader in the industries of the future that will help grow our economy.

“And we must bring in urgent measures to prevent yet more harm from the cost-of-living crisis, using a proper windfall tax on oil and gas giants to stop the energy price cap going up in April so that people have more money in their pockets.

“Built on the rock of economic stability, Labour will tackle the cost of living crisis and get our economy growing, with our Green Prosperity Plan, reform to business rates, and by making the UK the best place to start and grow a business.”

Meanwhile, the Liberal Democrats said the latest data was due to “gross incompetence and mismanagement” of the UK’s finances by the Conservative Party. The party’s Treasury spokeswoman Sarah Olney said: “Britain is dangling on over the edge of a recession after months of economic vandalism and chaos in government.

“The blame for these gloomy figures lies squarely with the government, who have botched budgets, failed to tackle inflation and have no plan for growth. The Conservative Party hasn’t a shred of economic competence left.”