Britain is officially in recession. But are things already getting better? Emily Hohler reports
Britain’s recession has been described as “technical” and “shallow”, but in the “brutal political arena ahead of a general election” it was given a different name: “Rishi’s recession”, say George Parker and Valentina Romei in the Financial Times. One of Rishi Sunak’s five promises at the start of 2023 was to “grow the economy”. Instead, GDP shrank by 0.1% and 0.3% in the last two quarters of 2023. Unless the figures are revised, “the ‘R’ word will be hanging around Sunak’s neck” until the release of the next quarterly figures in May.
The announcement last week is clearly embarrassing for Sunak, says David Smith in The Times, but it “also puts the ball firmly” in the Bank of England’s court. The Bank was too slow to nip inflation in the bud by raising rates in 2021 (the post-Covid recovery resulted in predictably “dramatic” 8.7% growth that year) and it is now likely to be too slow to cut them (from a 16-year high of 5.25%) because of fears of a “wage-price spiral”. The danger of this, as Andy Haldane, the Bank’s former chief economist warns, is that the Bank risks “crushing” the economy by keeping rates “too high for too long” and turning a “mild downturn, so far merely a touch worse than flatlining, into something much more serious”.
The irony is that Britain may already be out of recession, says Tim Wallace in The Telegraph. Indeed, as more economic data emerges, figures may be revised to find there “was in fact no recession”. Pay is rising briskly, faster than inflation. Samuel Tombs at Pantheon Macroeconomics predicts real wages will rise by 2.6%, with businesses anticipating raising wages by 5.1% over the next year. Furlough disruption aside, that would be the “strongest real wage growth in 17 years”. Additionally, house prices and mortgage approvals are rising again, as are transactions; NatWest reports a “slight uptick in demand for business loans” and retailers are doing well on the back of rising real wages, says Jeremy Warner, also in The Telegraph.
Long run of stagnation
The picture isn’t all rosy, however. As far as individuals are concerned, it’s GDP per head that matters, say Parker and Romei, and GDP per capita fell by 0.7% last year. This is the first contraction since the financial crisis, excluding 2
