Caymans Post

A world within. A state apart.
Tuesday, Feb 07, 2023

Things can only get even tougher, Chancellor warns as recession looms

Things can only get even tougher, Chancellor warns as recession looms

Recession on way as the big slowdown hits growth
Chancellor Jeremy Hunt steeled Britain for a wave of tax rises and swingeing spending cuts on Friday as new data showed that the nation was heading towards recession.

Preparing the ground for next week’s Autumn Statement, Mr Hunt warned that “extremely difficult decisions” were needed to restore confidence in the UK’s economy as soaring inflation bites into household budgets and rising interest rates choke off growth.

“It’s not going to be easy,” Mr Hunt said. “There are going to be some very difficult choices. I’ve used the word eye watering before, and that’s the truth.”

The Chancellor’s bleak assessment came after the Office for National Statistics said the UK’s output fell 0.2 per cent in the three months from July to September.

It dropped 0.6 per cent in September alone, although the fall was exaggerated by the impact of the extra bank holiday for the Queen’s funeral. Friday’s figures do not mean Britain is already in recession because the technical definition requires two consecutive quarters of falling GDP.

However, it is increasingly likely that the fourth quarter will see another dip following the surge in interest rates triggered by Kwasi Kwarteng’s disastrous mini-budget at the end of September, combined with rising energy costs, the cost-of-living crisis and plummeting consumer confidence.

Mr Hunt and Prime Minister Rishi Sunak will attempt to repair that damage on Thursday when they are expected to set out around £22 billion of tax rises and £33 billion of spending cuts to plug a fiscal black hole of about £55 billion.

As well as tax rises, the Chancellor is reported to be considering freezing day-to-day spending on public services from 2025-2028 to save £27 billion a year. But that has raised fears of a fresh wave of austerity, crippling already strained public services and a prolonged wave of strike action from public sector workers.

This week nurses voted to strike for the first time over pay. The Bank of England last week projected a two-year recession — the longest for a century — lasting until summer 2024 as it lifted the base rate to three per cent. The Bank warned that the UK economy faced “a very challenging outlook” although it said the recession would be relatively shallow.

The recession will not be confirmed until well into 2023 when the GDP figures for the fourth quarter are published by the ONS. It would be the third of the 21st century following the slumps caused by the global financial crisis and pandemic. Policymakers had hoped that Britain’s economy would bounce back strongly from the deep Covid-era falls in economic activity caused by three lockdowns and other restrictions.

However, this has been snuffed out by factors including global supply chain snarl-ups, spiking energy prices made worse by the war in Ukraine, Brexit problems and rapidly rising interest rates around the world to curb inflation. The lower than expected US inflation figure yesterday raised hopes that the worst of the cost-of-living crisis could be over.

Mr Hunt pointed to challenges being faced by other major economies and added: “What we need is a plan that shows how we are going to get through this difficult period. If it is a recession, how we make it shallower and quicker.”

Labour’s shadow chancellor Rachel Reeves blamed the Conservatives for their botched management of the economy. She said: “The reality of this failure is family finances crunched, British businesses left behind and more anxiety for the future.”

The ONS said the quarterly fall, which was slightly smaller than predicted by some City economists, was driven by manufacturing, which saw widespread declines across most industries. Services were flat overall.

Consumer-facing industries fared badly, with a notable fall in retail. Yael Selfin, chief economist at KPMG UK, said: “The current downturn is likely to last until the end of 2023, during which GDP is expected to shrink by 1.6 per cent.”
Newsletter

Related Articles

Caymans Post
Close
0:00
0:00
2 earthquakes in Turkey killed over 2,300 people
Powerful Earthquake Strikes Turkey and Syria, Killing More Than 1,300 People.
Turkish photographer Ugur Gallenkus portrays two different worlds within a single image. Brilliant work
Tennessee Bill Would Imprison People for 3 Years If They 'Lie' About Rape to Get an Abortion.
Charlie Munger, calls for a ban on cryptocurrencies in the US, following China's lead
EU found a way to use frozen Russian funds
First generation unopened iPhone set to fetch more than $50,000 at auction.
WARNING GRAPHIC CONTENT - US Memphis Police murdering innocent Tyre Nichols
Almost 30% of professionals say they've tried ChatGPT at work
Interpol seeks woman who ran elaborate exam cheating scam in Singapore
What is ChatGPT?
Bill Gates is ‘very optimistic’ about the future: ‘Better to be born 20 years from now...than any time in the past’
Tesla reported record profits and record revenues for 2022
Prince Andrew and Virginia Giuffre Photo Is Fake: Ghislaine Maxwell
Opinion | Israel’s Supreme Court Claims a Veto on Democracy
Moonwalker Buzz Aldrin Gets Married On His 93rd Birthday
Who’s Threatening Israeli Democracy?
Federal Reserve Probes Goldman’s Consumer Business
China's first population drop in six decades
Microsoft is finalising plans to become the latest technology giant to reduce its workforce during a global economic slowdown
China's foreign ministry branch in Hong Kong urges British gov't to stop the biased and double standards Hong Kong report
Tesla slashes prices globally by as much as 20 percent
1.4 Million Copies Of Prince Harry's Memoir 'Spare' Sold On 1st Day In UK
After Failing To Pay Office Rent, Twitter May Sell User Names
Lisa Marie Presley, singer and daughter of Elvis, dies aged 54
FIFA president questioned by prosecutors
Britain's Sunak breaks silence and admits using private healthcare
Hype and backlash as Harry's memoir goes on sale. Unnamed royal source says prince 'kidnapped by cult of psychotherapy and Meghan'
Saudi Arabia set to overtake India as fastest-growing major economy this year 
Google and Facebook’s dominance in digital ads challenged by rapid ascent of Amazon and TikTok
FTX fraud investigators are digging deeper into Sam Bankman-Fried's inner circle – and reportedly have ex-engineer Nishad Singh in their sights
TikTok CEO Plans to Meet European Union Regulators
UK chaos: Hong Kong emigrants duped by false prospectus
France has banned the online sale of paracetamol until February, citing ongoing supply issues
Japan reportedly to give families 1 million yen per child to move out of Tokyo
Will Canada ever become a real democracy?
Hong Kong property brokerages slash payrolls in choppy market
U.S. Moves to Seize Robinhood Shares, Silvergate Accounts Tied to FTX
Effect of EU sanctions on Moscow is ‘less than zero’ – Belgian MEP
Coinbase to Pay $100 Million in Settlement With New York Regulator
FTX assets worth $3.5bn held by Bahamas securities regulator
A Republican congressman-elect is under investigation in New York after he admitted he lied about his education and work experience.
Brazilian football legend Pele, arguably the greatest player ever, has died at the age of 82.
Hong Kong to scrap almost all its Covid rules
EU calls screening of travellers from China unjustified
US imposes Covid testing for visitors from China
Ukraine President Volodymyr Zelenskyy Addresses Joint Session of Congress - FULL SPEECH
If a country is denied the right to independence by another, it is not in a union. It is in a dictatorship.
Where is Rishi? Chancellor Jeremy Hunt's excuses about the UK's economic challenges just don't make sense
Former FTX CEO Bankman-Fried finally arrested in Bahamas after U.S. files charges
×