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UK ended 2023 in recession, economists project, but decision on knife edge before official figures

Official figures are set to show the UK slipped into the shallowest recession in history, according to a survey of economists, but the decision remains on a knife edge (AFP via Getty Images)
Official figures are set to show the UK slipped into the shallowest recession in history, according to a survey of economists, but the decision remains on a knife edge (AFP via Getty Images)

Official figures are set to show the UK slipped into the shallowest recession in history, according to a survey of economists, but the decision remains on a knife edge.

Government statisticians will reveal on Thursday whether or not the UK slipped into the first non-lockdown-related recession since 2009 in the second half of last year.

Increasing numbers of City analysts are now forecasting a fall in GDP of 0.1% in the three months to December. That would follow the same level of decline in the third quarter and meet the technical definition of recession in another blow to Rishi Sunak. A recession is typically defined as two consecutive quarters of declining GDP.

At the start of last year the Prime Minister highlighted getting the economy growing as one of his five priorities for 2023.

The latest survey of City economists by the Bloomberg news wire found that 23 of 37 forecast a small drop in output in the third quarter.

Other economic figures out this week are expected to reveal a second consecutive increase in the rate of inflation in January and a further fall in the number of job vacancies.

Paul Dales of Capital Economics is among those predicting a small fourth-quarter GDP decline, but he said the call is “touch-and-go”. He added that observers should avoid reading too deeply into a possible wave of negative news this week.

He said: “We’d recommend ignoring any reports on the back of next week’s data releases that the UK economy is heading in the wrong direction on inflation and activity. It may only be a few months before inflation is back below 2.0% and an economic recovery is underway.”

A fall into recession may lead to more calls for the Bank of England to cut its interest rates. City markets suggest that the Bank is unlikely to cut rates until June.

As speculation over a possible recession continued, the City has been boosted by an uptick in mergers, with news today of two warehouse landlords planning to combine.

But Investegate’s Tony Cross pointed to an “elusive” source of important activity still missing in London: Initial public offerings. “While M&A news is good for the Square Mile in the short term, acquisitions do nothing to stem that declining trend when it comes to the number of companies maintaining a London listing,” he said.