The second half of 2023 saw the British economy enter a recession, providing a difficult backdrop for Prime Minister Rishi Sunak’s anticipated election this year. Sunak has pledged to accelerate growth.
According to official data, the gross domestic product (GDP) shrank by 0.1% between July and September before contracting by 0.3% in the three months leading up to December.
In spite of this, the Bank of England is still upbeat about 2024 and anticipates a growth return. Any underwhelming showing, though, might harm Prime Minister Rishi Sunak’s attempts to win over voters ahead of the anticipated national election later this year.
Analysts had predicted a 0.2% reduction in economic output for December, but the Office for National Statistics revealed a 0.1% decline.
The British pound moderately declined vs the dollar and the euro after the GDP data was released, indicating market reactions to the economic slowdown.
The British Chambers of Commerce’s director of policy and insight, Alex Veitch, voiced concerns. He emphasized the significance of the next budget and urged Chancellor Sunak to present a well-defined plan for corporate and economic expansion.
However, Finance Minister Jeremy Hunt is still upbeat, pointing to “signs the British economy is turning a corner” and urging support for sticking with the existing tax cut plan in order to strengthen the economy.
PM Rishi Sunak in an interview
Prime Minister Rishi Sunak is expected to announce the election date. With inflation currently double the target at 4%, expectations are high that the Bank of England would start cutting interest rates in the middle of these economic difficulties.
Although the central bank has aggressively hiked interest rates in the past to tackle rising prices, which peaked at more than 11 percent in the past year, it is being cautious for fear that doing so too quickly will rekindle inflationary pressures.
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