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UK in Technical Recession

Thought for Thursday, data released this morning shows UK in technical recession, Sunak's pledge for economic growth takes a blow, increasing number of MPs not looking for re-election for the Conservative party, and Labour party lead drops seven percentage points.

Thought for Thursday

“The forest was shrinking, but the trees kept voting for the axe; for the axe was clever and convinced the trees that because his handle was made of wood, he was one of them”.

UK’s Technical Recession

Fresh data out this morning indicates that the UK was in recession following two consecutive quarters of economic contraction over Q3 and Q4 2023. With GDP falling 0.1% over the third quarter of 2023, today’s print showed growth slumping 0.3% on a quarter-on-quarter basis over Q4, well below the consensus which was forecasting a -0.1% figure.

The slump in output over the last three months of the year came as the UK’s service sector (which roughly accounts for some 70% of output) contracted 20bps, while production fell 100bps and construction sank 130bps. Exports also fell 2.9% as imports decreased 0.8%.

On the expenditure front, both household and government spending eased over Q4. With households continuing to grapple with rising costs of living and monetary conditions being at their tightest levels in years, household consumption is estimated to have fallen 0.1% within the quarter. Meanwhile, government consumption expenditure fell by 0.3% with the ONS citing how this “mainly reflects lower activity in education and health. The fall in health may reflect lower activity because of industrial action across the quarter.”

When looking at 2023 as a whole, the UK economy recorded sluggish growth of just 0.1%, falling well below the US which grew 2.5%, and the Eurozone area which expanded half-a-percent.

Sunak Misses Economic Growth Pledge

Headlines around the UK entering a recession marks another blow for Rishi Sunak, not least given his pledge made on 4 January 2023 to boost growth. Here, during the second of five promises, the Prime Minister pledged to “grow the economy, creating better-paid jobs and opportunity right across the country.”

While it remained ambiguous as to what figures would constitute the promise being met, according to Downing Street, it would have been achieved if economic growth between October and December was higher than between July and September 2023. Hence given today’s print, it’s evident that Sunak missed this promise.

The figures will also make for uneasy reading at the Treasury and No.11, particularly as Chancellor Jeremy Hunt prepares for his Spring Budget set for 6 March.

As we looked at earlier this month, the OCED downwardly revised downgraded growth forecasts for the country over 2024. The group now estimate that the UK will see just 0.7% growth in GDP this year ahead of 1.2% growth next year, marking the third slowest growth in the G7 after Germany and France.

List of Conservative MPs Not Seeking Re-Election Grows

Yesterday another Conservative Member of Parliament announced that they would not seek re-election. Dr Kieran Mullan, who has held the Crewe and Nantwich seat since 2019 became the 58th Tory MP to announce that they will stand down at the next general election. This represents the highest number of Conservative MPs to announce their standing down since 1997 when 75 members did so. It also comes well above the 13 MPs which made such an announcement in 2017 and 41 in 2019.

The number of Conservatives who will not seek re-election is indicative of the challenges facing the party and leadership, as the country gears up for an election poised for this year. Many of those resigning have no doubt consulted various polls and pollsters while assessing their chances of retaining the seat as headlines continue to dominate on Labours lead in the polls.

Labour Lead Narrows According to Savanta Poll

Yesterday a poll published by Savanta indicated that the Labour party’s lead fell to its lowest since June 2023, having dropped seven percentage points. The poll conducted last week, suggests that Labour would command 41% of the popular vote, which when put against modelling by Electoral Calculus website pointed to Labour winning a 92-seat majority.

Labour have made headlines in recent days following their decision to U-Turn on their Green Policy which earmarked £28bn for green investment. The party also had to suspend two parliamentary candidates given their remarks about Israel, including Azhar Ali who was standing for Labour in the Rochdale by-election.

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