UK Economy Shrank by More Than Previously Thought in 3rd Quarter

The City of London financial district can be seen as people walk along the south side of the River Thames, in London, on March 19, 2021. (Henry Nicholls/Reuters)

The UK economy contracted by more than previously thought between July and September and growth has been weaker than estimated throughout much of the past year, official data has revealed.

According to new figures released by the Office for National Statistics (ONS) on Dec. 22, the UK’s GDP fell by 0.3 percent in the third quarter of 2022, more than the 0.2 percent decline initially estimated.

The ONS also said that the economy grew less than first estimated throughout the first half of the year.

New figures show the UK economy grew by 0.6 percent in the first quarter and 0.1 percent in the second quarter, less than earlier estimates which put growth at 0.7 percent and 0.2 percent in those quarters respectively.

Real household disposable income has now fallen for four consecutive quarters amid soaring inflation, the ONS said.

The UK’s GDP is now estimated to be 0.8 percent below where it was before the COVID-19 pandemic struck, revised down from the previous estimate of 0.4 percent below. The UK is the only G-7 economy to see output remain lower than its pre-pandemic level.

Darren Morgan, director of economic statistics at the ONS, said: “Our revised figures show the economy performed slightly less well over the last year than we previously estimated, with manufacturing and electricity generation notably weaker.

“Household incomes continued to fall in real terms, albeit at a slower rate than in the previous two quarters, while taking account of inflation—household spending fell for the first time since the final COVID-19 lockdown in the spring of 2021.”

Britain's Chancellor of the Exchequer Jeremy Hunt walks out of Number 11 Downing Street on his way to make a full budget statement in the House of Commons, in London, on Nov. 17, 2022. (Justin Tallis/AFP via Getty Images)

‘Losing Control’

Chancellor of the Exchequer Jeremy Hunt sought to blame Russian President Vladimir Putin’s invasion of Ukraine for the economic difficulties.

He said: “High inflation driven by Putin’s invasion of Ukraine is slowing economic growth across the world. No country is immune, least of all Britain.”

He said that getting prices down is his “top priority” and the government has a plan which will help to “more than halve inflation next year while laying the foundations for long-term growth through record investment in infrastructure and new industries.”

Prime Minister Rishi Sunak leaving 10 Downing Street, London, to appear for the first time in front of the Commons Liaison Committee of select committee chairs, in the House of Commons, on Dec. 20, 2022. (James Manning/PA Media)

But the main opposition Labour Party has accused the government of losing control over the economy.

Labour’s shadow chancellor Rachel Reeves wrote on Twitter: “The Tories have lost control of the economy and are leaving millions of working people paying the price. Only Labour has a proper plan to get our economy growing.”

The Liberal Democrats, another opposition party, said that Prime Minister Rishi Sunak, who served as chancellor until July, is to blame for the economic problems.

The party’s Treasury spokeswoman Sarah Olney said: “For every inch the UK moves closer to recession, the blame must lie squarely at the feet of Rishi Sunak.

“Ordinary families and pensioners should not have to pay the price for the Conservative government’s mistakes. There is no more time for wake-up calls—the government need to get a grip on our economy.”

‘Deepest Recession’ in G-7

Economists have expressed pessimism over the UK’s economic prospects.

Samuel Tombs at Pantheon Macroeconomics said: “The national accounts confirm that the UK was the only G-7 economy in which third quarter GDP still was below its pre-COVID level. Indeed, GDP in the UK was 0.8 percent below its Q4 2019 level, whereas it was 4.3 percent above in the U.S., 2.7 percent above in Canada, 1.8 percent in Italy, 1.1 percent in France, 0.9 percent in Japan, and 0.3 percent in Germany.”

He added, “Looking ahead, the UK likely will continue to underperform; we expect Britain to suffer the deepest recession among major advanced economies in 2023, due to the severity of the headwinds from both monetary and fiscal policy.”

Martin Beck, chief economic adviser to the EY Item Club, said: “The third quarter fall in gross domestic product is unlikely to prove a one-off. Retail weakness, a poor set of purchasing managers’ index surveys and disruption from industrial action all point to the economy likely contracting again in the fourth quarter.”

He predicted that the recession will persist over the first half of 2023, as “high inflation affects household spending power and tighter monetary and fiscal policy weigh on activity.”

Last month, the Organisation for Economic Cooperation and Development predicted that the UK economy will shrink by 0.4 percent in 2023, more than any other G-7 nation. It said the UK economy will grow by just 0.2 percent in 2024.

The Office for Budget Responsibility confirmed on Nov. 17 that Britain was officially in recession and that the previous eight years’ growth would be wiped out.

It predicted that the economy will shrink by 1.4 percent in 2023 before growth gradually picks up.

PA Media contributed to this report.