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The UK economy shrank in the third quarter of the year amid soaring inflation, adding to fears that the “long recession” has kicked in.
The country’s gross domestic product (GDP) fell by 0.2% in the three months to September 2022 compared with the previous quarter, the Office for National Statistics (ONS) reported on Friday.
Chancellor Jeremy Hunt also warned that the UK is facing a “tough road ahead”, citing that the economy is not immune from “very high global energy prices”.
“I am under no illusion that there is a tough road ahead – one which will require extremely difficult decisions to restore confidence and economic stability,” Hunt said in a statement.
“But to achieve long-term, sustainable growth, we need to grip inflation, balance, the books and get debt falling. There is no other way.”
Last week, the Bank of England said the UK could be sliding into its longest recession since records began.
In its latest report, the statistics office said the UK’s GDP fell by 0.6 in September alone, after a decline of 0.1% in August 2022, driven by a fall in the services sector.
Sectors
After a growth of 0.1% in August, the services sector dropped by 0.8% in September. The decline was driven by the 3.2% fall in information and communication activity, and 2% fall in wholesale and retail trade, and repair of motor vehicles and motorcycles.
Consumer-facing services posted a 1.7% decline in output, lower than the 1.6% fall in August 2022. However, output in production and construction went up by 0.2% and 0.4%, respectively.
Responding to the latest data from ONS, Hunt said the root cause of the slowdown is inflation, which needs to be addressed.
“What we need to do now is present a plan to tackle the root cause of the issue.”
Hunt noted that the UK is not the only economy shrinking at the moment. According to the International Monetary Fund (IMF), a third of the world economy is in recession this year or will experience a downturn in 2023.
“[This is] principally, but not entirely because of very high global energy prices. We are not immune to that in the UK and what we need is a plan that shows how we are going to get through this difficult period,” he said.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
