By JILL LAWLESS – Associated Press
LONDON (AP) – The UK economy contracted within the three months to September, official statistics stated on Friday, as forecasters warned of many months of contraction forward.
The Office for National Statistics stated gross home product fell 0.2% between July and September, a smaller-than-expected fall however nonetheless seen as a sign of the beginning of an extended recession.
The GDP shrank by 0.6% in September and by 0.1% in August, the statistics workplace stated. Behind the drop are a drop in manufacturing output and a further vacation to mark the dying of Queen Elizabeth II.
The UK economy is now 0.2% smaller than it was in February 2020, simply earlier than the COVID-19 pandemic shut down giant components of the economy for months.
The UK economy is struggling like many different international locations as the Russian invasion of Ukraine has pushed up meals and power prices and pushed client value inflation to a 40-year excessive.
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Martin McTague, nationwide chair of the Federation of Small Businesses, stated the decline in GDP “is a headline figure made up of a zillion pieces of disappointing news for small businesses across the country – a new venue or premises they couldn’t open, a contract which ended unexpectedly, one employee had to be laid off.”
The Bank of England last week raised its main interest rate by three-quarters of a point to 3% – the largest hike in three decades. The central bank said the move was necessary to beat back stubbornly high inflation, which is eroding living standards and likely to trigger a “extended” recession.
UK finances took a turn for the worse when then Prime Minister Liz Truss announced a huge package of unfunded tax cuts on September 23. The package alarmed financial markets, sending the pound to record lows against the dollar and forcing the Bank of England to intervene to stop the spread of the crisis.
Truss resigned less than a month later, leaving her successor, Prime Minister Rishi Sunak, and Treasury chief Jeremy Hunt to find billions in savings to shore up the nation’s finances.
Hunt is due to make an emergency budget statement next week that is expected to include both tax hikes and public spending cuts. He said Friday’s figures showed that “extraordinarily tough selections would have to be made to restore confidence and financial stability. But to obtain long-term, sustainable progress, we’d like to get inflation underneath management, steadiness the books, and scale back debt. There isn’t any different manner.”
Nicholas Hyett, an equity analyst at investment firm Wealth Club, said economic output in the third quarter was “full of pink flags.”
“As customers shut the hatches to a harsh winter and the federal government proposes vital tax hikes and spending cuts, we consider the economy will contract once more within the fourth quarter,” he stated.
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