Britain’s economy contracted in the three months to September at the start of what is likely to be a lengthy recession, adding to the challenge for finance minister Jeremy Hunt as he prepares to raise taxes and cut spending.
Friday’s official data showed that economic output shrank by 0.2% in the third quarter, less than the 0.5% contraction analysts had forecast in a recent poll. The Bank of England said last week that Britain’s economy was set to go into a recession that would last two years if interest rates were to rise as much as investors had been pricing. And further said that even without further rate hikes, the economy would shrink in five of the six quarters until the end of 2023.
The weak economic outlook provides a tough backdrop for next week’s budget statement by finance minister Hunt. Responding to Friday’s data, he repeated his warnings that tough decisions on tax and spending would be needed to repair Britain’s public finances and the government’s credibility on economic policy after Liz Truss’s brief spell as prime minister.