The UK economy has received a huge boost by defying warnings from the Bank of England and avoiding a potentially damaging recession. The scenario, with the UK posting 0.1 percent growth in the fourth quarter, revised figures from the Office for National Statistics (ONS) show. The original GDP estimate between October and November, released in mid-February, had forecast growth would flatline at zero percent.
A recession is generally defined in the UK as two quarters of declining GDP in a row, and the economy had contracted 0.2 percent in the third quarter of last year.
The Bank of England had last week released updated predictions, which forecast the economy entered recession in the second half of last year.
But it ruled out the likelihood of such a scenario occurring again in 2023.
ONS director of economic statistics Darren Morgan said: “The economy performed a little more strongly in the latter half of last year than previously estimated, with later data showing telecommunications, construction and manufacturing all faring better than initially thought in the latest quarter.
“Households saved more in the last quarter, with their finances boosted by the government’s energy bill support scheme.
“Meanwhile, the UK’s balance of payments deficit with the rest of the World narrowed, driven by increased foreign earnings by UK companies, particularly in the energy sector.”
During recent months, the cost of living crisis has blown a huge hole in consumer spending, particularly during the Christmas trading period.
But the UK economy has gradually started to recover and has performed better than expected, despite the continued impact from high inflation, which remains in double digits.
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In February, the Bank’s Monetary Policy Committee said UK GDP would drop slightly by 0.1 percent in Q1 and another 0.4 percent in Q4.
However last week the Bank of England said it no longer expected the UK to enter a technical recession this year.
The economy is now expected to grow “slightly” in the second quarter of this year – meaning a technical recession would be avoided.
On March 15, Chancellor Jeremy Hunt said official forecasts show the UK will swerve a “technical recession” in 2023 as he unveiled his Budget to the country.
He revealed forecasts from Office for Budget Responsibility (OBR) predict inflation will fall to 2.9 percent by the end of the year.
Inflation had surged to 10.7 percent in the final quarter of last year following the disastrous mini-Budget in September that sent shockwaves through financial markets.
But addressing MPs in the House of Commons, Mr Hunt said the latest forecasts show that due to “changing international factors and the measures I take, the UK will not now enter a technical recession this year”.
