Reeves says Britain trapped in cycle of ‘decline’ as UK falls into recession – live

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The UK is believed to have slipped into recession on the finish of final 12 months after a weak December for the nation’s economic system, official figures are set to point out.

The Workplace for Nationwide Statistics (ONS) is predicted to disclose that the UK economic system contracted for the second quarter in a row within the ultimate three months of 2023.

Most economists are forecasting a 0.1% decline in gross home product (GDP) between October and December.

This may comply with a 0.1% contraction within the earlier three months, after a downward revision in opposition to the zero development initially estimated.

A contraction within the fourth quarter would imply the UK tipped right into a technical recession, as outlined by two or extra quarters in a row of falling GDP.

The Financial institution of England has held rates of interest at 5.25% 4 instances in a row.

Official figures for the fourth quarter of final 12 months are additionally anticipated to point out that the economic system was weak final 12 months as a complete.

ONS estimates counsel it didn’t develop in any respect between April and June, earlier than shrinking between July and September, which has left the UK prone to recession within the ultimate three months.

Financial institution of England governor Andrew Bailey has signalled {that a} recession, if confirmed, could be prone to be temporary, telling a Lords committee on Wednesday the economic system was starting to select up.

Mr Bailey instructed the Home of Lords Financial Affairs Committee: “In our February Financial Coverage Report, it was within the steadiness – we didn’t have a recession within the forecast, however it’s at finest flat, within the view we took.

“It wouldn’t take a lot to tip it both means, frankly.

“Going ahead – and I feel that is in some methods extra important – we are actually seeing some indicators of the start of a pick-up in a number of the surveys, as an illustration … we’ve acquired a modest pick-up this 12 months which continues thereafter.”

UK inflation defied expectations to carry regular at 4% in January as decrease meals costs helped offset will increase in vitality prices, official figures present. Economists had anticipated an increase to 4.2%:

Staff are prone to begin feeling higher off regardless of a short-lived recession, say consultants.

Ellie Henderson, an economist at Investec stated: “Our base case is that the economic system in all probability did tip right into a recession, though this could be within the mildest of senses: a greater description of the pattern may be stagnation.”

Investec is pencilling in a 0.1% contraction within the fourth quarter, with weak retail knowledge dragging on the all-important providers sector and resulting in a 0.3% fall in output in December.

Ms Henderson added: “In all, we anticipate that it was a troublesome finish to the 12 months for the UK economic system, however 2024 is prone to have gotten off to a greater begin as family budgets look to have loosened slightly.

“Certainly, the decline in inflation mixed with nonetheless excessive wage development will proceed to drive actual family disposable incomes greater, a key issue behind the anticipated restoration this 12 months.

“There may also be the added raise to post-tax incomes from the 2p minimize to workers’ Nationwide Insurance coverage Contributions, efficient from January 6 – and, in all chance, extra to return within the March Funds.”

Shares in London soared on Wednesday after new official inflation figures have been decrease than economists had anticipated, growing the prospect of a Financial institution of England price minimize in months to return.

The FTSE-100 rose 56.12 factors, or 0.75%, ending the day at 7,568.4, as retailers and housebuilder Persimmon joined the bottler of Coca-Cola near the highest of the index.

The inflation price was 4% in January, the identical because the month earlier than, however merchants celebrated as a result of economists had anticipated an increase to 4.2%.

“The previous 24 hours have been filled with surprises, and this morning’s UK inflation knowledge actually caught markets on the hop,” stated Chris Beauchamp, chief market analyst at on-line buying and selling platform IG.

“Fast deceleration in worth development has hit the pound onerous, because it appears a Financial institution of England price minimize has turn into a more likely occasion within the first half of the 12 months.

“This has helped the FTSE-100 to outperform different indices immediately, although in fact it lags far behind on a longer-term view.”

A technical recession might additional add to the case for an rate of interest minimize, with the Financial institution of England already indicating it’s extra a case of when, not if, a discount will come.

Financial institution of England governor Andrew Bailey stated that inflation remaining unchanged “leaves us broadly the place we thought we have been going to be”.

Requested whether or not he thought the UK might be caught with inflation at its present 4% stage, he reiterated that the speed was anticipated to return to the two% goal by the spring, in response to its personal forecasts.

“It appears like we’re going to have fairly a leg down between now and April-Might time,” he stated.