UK economy contracts amid recession fears

Data from the UK's Office for National Statistics (ONS) on Friday showed economic output shrank by a total of 0.2% in the third quarter, with the British economy shrinking by 0.6% in September alone.

Friday's statistics are the first drop in UK GDP since the country closed businesses under a coronavirus lockdown in early 2021.

The UK's economy is now smaller than it was three years ago on a calendar-quarter basis, Reuters news agency reported. The Bank of England has warned a long recession could be ahead for the UK.  

The ONS said September's steeper drop could be attributed to a decline in manufacturing output and a "notable fall in retail,'' with shutdowns of businesses during the period of mourning for Queen Elizabeth II. 

Finance minister faces 'tough road'  

The figures come as Britain's Finance Minister Jeremy Hunt prepares to present a new budget next Thursday. Hunt commented on the latest figures, warning of a "tough road ahead… to restore confidence and economic stability", as many expect spending cuts and tax increases in the next budget.

"But to achieve long-term, sustainable growth, we need to grip inflation, balance the books and get debt falling. There is no other way," he said.

Britons are currently experiencing a severe cost-of-living crisis, with decades-high inflation and a jump in energy prices caused by the Russian war on Ukraine.

"The sharp rise in energy and other consumer prices has contributed to a squeeze on household finances, which is expected to have pushed the UK economy into a recession from the third quarter of this year," Yael Selfin, chief economist at KPMG UK, told the AFP news agency on Friday.

rmt/wmr (AFP, Reuters)