Recession UK: Jeremy Hunt branded 'out of touch' over inflation claims as UK enters technical recession

The UK has entered a technical recession – and Chancellor Jeremy Hunt’s comments in the wake of figures have been branded ‘out of touch’

Chancellor Jeremy Hunt insisted it was the “right thing to do” to prioritise tackling inflation, after the UK slid into technical recession.

Official figures have confirmed on Thursday that Britain’s economy slipped into a recession at the end of 2023 after output contracted by more than expected in the final three months.

The Office for National Statistics (ONS) estimated that gross domestic product (GDP) fell by 0.3 per cent in the fourth quarter, following a decline of 0.1 per cent in the previous three months.

Chancellor of the Exchequer Jeremy Hunt outside No.11 Downing Street. Picture: PA

It means the economy entered a technical recession, as defined by two or more quarters in a row of falling GDP. It marks the first time the UK has entered recession since the first half of 2020, when the initial Covid-19 lockdown sent the economy plunging into reverse.

The figures deal a blow to Prime Minister Rishi Sunak, who has promised to grow the economy as one of his five priorities.

The Chancellor told broadcasters: “We always expected growth to be weaker while we prioritised tackling inflation. That means higher interest rates and that is the right thing to do because you can’t have long-term healthy growth with high inflation.

“But also for families when there is a cost-of-living crisis, when the cost of their weekly shop is going up, their energy bills are much higher, it is the right thing to do.

“The underlying picture here is an economy that is more resilient than most people predicted, inflation is coming down, real wages have been going up now for six months.

“If we stick to our guns, independent forecasters say that by the early summer we could start to see interest rates falling and that will be a very important relief for families with mortgages.”

However, Labour suggested Mr Hunt’s comments on the UK entering technical recession meant the Chancellor was “out of touch”.

Shadow chancellor Rachel Reeves said the Prime Minister’s promise to grow the economy was “in tatters”.

She said: “The Prime Minister can no longer credibly claim that his plan is working or that he has turned the corner on more than 14 years of economic decline under the Conservatives that has left Britain worse off. This is Rishi Sunak’s recession and the news will be deeply worrying for families and business across Britain.”

Mr Hunt said: “While interest rates are high – so the Bank of England can bring inflation down – low growth is not a surprise.

“But there are signs the British economy is turning a corner; forecasters agree that growth will strengthen over the next few years, wages are rising faster than prices, mortgage rates are down and unemployment remains low. Although times are still tough for many families, we must stick to the plan – cutting taxes on work and business to build a stronger economy.”

The fourth quarter contraction was the biggest since the first three months of 2021, at the height of the pandemic.

Most economists were forecasting a 0.1 per cent decline in GDP between October and December.

TUC general secretary Paul Nowak said the UK economy was in “dire straits”. He said: “After years of Tory stagnation, we are now in technical recession.

“The Conservatives’ economic failures are hitting jobs and living standards. With household budgets at breaking point, spending is down and the economy is shrinking. At the same time our crumbling public services are starved of much-needed funding.

“After being in power for 14 years, the Tories have driven our economy into a ditch and have no idea how to get out. It’s time for a government with a serious long-term plan and strategy for renewal, to revive our economy and sustain growth into future.”

Martin McTague, national chairman of the Federation of Small Businesses (FSB), said confirmation of the technical recession “will just confirm what many small firms have been saying for some time now – it’s very tough out there”.

He said: “Our research found that confidence among small firms has been in negative territory for seven straight quarters, due to the energy price crisis and the knock-on impact on the cost of doing business.”