UK Economy Drops into Recession

The UK is in recession after the economy shrank by 0.3% in the final quarter of 2023. Overall, real GDP grew by just 0.1% last year, lagging well behind a resurgent US economy.

The data is a little at odds with the continued strength of the labour market - unemployment has been revised down to 3.9% of the labour force. Weak growth has many causes but consumer spending has been dragged down by falling real disposable incomes.

Accounting for population growth, real GDP per capita dropped by 0.7% in 2023 - a reduction in real living standards of around £200 per person. Indeed real GDP per capita has declined in each of the last seven quarters.

And trend growth has clearly weakened over the last fifteen years if we look back to just before the Global Financial crisis and the fall out from the Brexit referendum.

The data chart below from the Resolution Foundation shows the widening gap between actual GDP and what might have happened if previous growth rates had been maintained.

More here from Ed Conway at Sky