In the face of record inflation and soaring interest rates, health diagnoses of the British economy have been consistently critical over the past year. Friday’s revelation of GDP growth in November – contrary to analysts’ predictions – appears to have bucked the trend, leading many to wonder whether a dreaded recession is indeed the country’s fate. Express.co.uk has plotted the charts to find the answer…
The UK’s real gross domestic product (GDP) is the sum of all goods and services produced within the country adjusted for inflation over a certain period of time. In November, monthly real GDP is estimated to have grown by 0.1 percent, according to the Office for National Statistics (ONS).
The services sector – which makes up 80 percent of the economy – was the main driver of GDP growth during the month, growing by 0.2 percent, the FIFA World Cup providing a boost to pubs and restaurants.
The UK remains the world’s second-largest services exporter, behind the US only, and has widened its trade surplus significantly over the past two decades, from £4.8billion at the start of 1997 to £34.7billion today.
However, ONS director of economic statistics Darren Morgan said the boon from services was “partially offset by further falls in some manufacturing industries, including the often-erratic pharmaceutical industry, as well as falls in transport and postal, partially due to the impact of strikes.” The construction industry posted zero growth for the month, while the manufacturing sector shrank by 0.5 percent.
Back in November, the Bank of England (BoE) warned the UK was heading for its longest recession in a century – lasting from the end of 2022 to mid-2024.
The effects of a recession are long-lasting. The UK experienced a brief – but dramatic – recession during the first half of 2020 as a result of lockdown. As of the third quarter of 2022, the UK remained the only G7 country whose economy was yet to return to pre-pandemic levels.
Following the 2008 financial crisis – during which the British economy contracted for five quarters in a row – it took the country five years to recover.
The BoE has been raising the interest rate at record pace over the past year – performing nine consecutive hikes to reach 3.5 percent in mid-December – in its bid to bear down on inflation, currently at 10.7 percent.
Amid increasingly expensive borrowing and the cost-of-living crisis, consumers have less to spend. Although this reduces the pressure on rising prices, it also makes recession ever more likely.
Late last year, Chancellor Jeremy Hunt and BoE governor Andrew Bailey both warned of a “tough road ahead”.
However, there is good news from private capital markets, as the FTSE 100 – a share index of the UK’s 100 most valuable companies – approaches its all-time high.
On Friday morning the FTSE 100 rose by 0.6 percent to 7,838. The index would only have to go up by another 0.8 percent to beat its intraday record of 7,903 achieved on 22 May 2018.