Economists are looking forward to next week’s Autumn Statement as the UK’s official statisticians showed the country might already be in a recession.
Experts say that what Chancellor Jeremy Hunt pulls out of his hat next Thursday could influence how long and how serious the likely recession becomes.
The support on energy bills will be key for the spending power of millions of households across the country, and will have a knock-on impact on the economy as a whole, said James Smith, developed markets economist at ING.
The Government has promised that some kind of support will continue past April when rules capping electricity prices at 34p per unit and 10.3p for gas come to an end.
However, what exactly that support looks like could be vital, with many speculating it could be targeted at those who need it the most, leaving others to fend for themselves.
“Above all, we’ll be looking for details on how the Government will make its energy support less generous from April, something which has the greatest scope to reshape the 2023 outlook,” Mr Smith said.
“The sharp fall in wholesale gas prices could see most households paying £3,300 on average during the 2023 financial year, compared to £2,500 annually under the Government guarantee.
“That would equate to roughly 9% of household disposable income and would add a further drag to overall economic activity next summer.”
Barret Kupelian, a senior economist at PwC, said while the decline for the third quarter was better than expected, the economy is on a bad track.
“The overall momentum in UK economic activity, however, is also concerning,” he said.
“Inflation remains high, financial conditions are tightening at a rapid pace and there is a high potential for cuts in Government spending in the Autumn Statement next week. These will all be significant headwinds to future growth.”
Trades Union Congress (TUC) boss Frances O’Grady and the Resolution Foundation think tank both called on the Government not to hit already stretched public services.
She said: “Sunak and Hunt must not repeat the mistakes of Cameron and Osborne. Tory cuts over the past 12 years have meant the slowest recovery for a century.
“The Government has a choice. Rather than a recession, they should choose more funding for the vital public services like schools and our NHS, pay rises for our dedicated public servants that match the cost of living, and investment in green tech to meet the challenge of net-zero. This is how you build a fairer and more resilient economy.”
David Bharier, head of research at the British Chambers of Commerce, said: “The Chancellor’s Autumn Statement must reassure the financial markets after the recent self-inflicted turmoil.
“But businesses need to see a long-term economic plan that invests in people, skills, and infrastructure and radically improves our trading relationships with key markets, not least across Europe.”