In the last quarter of 2022, a recession in Brexit UK was all but certain. The government, along with top analysts, agreed that not only was a prolonged economic downturn a foregone conclusion, but it was already underway.
Despite a 0.5% monthly fall in Gross Domestic Product (GDP) in December that was deeper than had been forecast, the UK just dodged entering a recession due to activity in other sectors, according to the Office for National Statistics (ONS).
Although the British economy showed no growth in the final quarter of 2022, it did not recede – a recession is defined by analysts as two-quarters of negative growth (it had contracted 0.2% in Q3).
“The economy contracted sharply in December meaning, overall, there was no growth in the economy over the last three months of 2022,” said Darren Morgan, ONS director of economic statistics.
The new data also shows that output increased at an annualized rate of 0.1% in the October-December period after falling 0.7% in the previous period.
GDP, the main measure of output, fell by 0.5% month-on-month in December partly because of a hit from public sector strikes across the public sector, trains, and postal deliveries.
Overall, the UK economy expanded 4.1% last year after a growth of 7.4% in 2021, according to the ONS report.
Dreary Outlook for 2023
Although the UK did not see two consecutive quarters of declining GDP last year, the ONS says growth is expected to remain close to zero in 2023.
In addition to high energy prices, and increasing interest rates, finance minister Jeremy Hunt also warned the UK was “not out of the woods yet” due to persistent inflation.
The Bank of England is vowing to continue hiking interest rates for the foreseeable future – raising them by another half point to 4% last week. That’s the 10th consecutive raise and the highest level since the global financial crisis in 2008.
Earlier this month, the International Monetary Fund (IMF) predicted the UK would be the only country in the group of seven rich nations (G7) with negative growth in 2023.
Britain is also the only G7 member that has not yet returned to its pre-pandemic level of output – economic activity is 0.8% below its 2019 level, the ONS said.
Economy Losing £100 Billion a Year Thanks to Brexit
On the third anniversary of Britain’s exit from the EU, a new analysis shows lost output is causing a £100 billion per year deficit, leaving Britain’s economy 4% smaller than it would have been inside the bloc, according to Bloomberg Economics.
On January 31, 2020, the United Kingdom ended 47 years of belonging to the European Union and its predecessor, the European Economic Community (EEC).
Decreased business investment and fewer EU workers in employment are partly to blame for the loss – the UK economy has grown 19% less than the G7 average since leaving the EU.
According to Bloomberg economists, the main takeaway from the underperformance is that the rupture from the single market may have impacted the British economy faster than forecasters had expected.
Brexit also had a negative impact on the ability of companies to hire workers as many businesses have put spending decisions on hold due to uncertainty about what life outside the EU would mean.
Economists’ Predictions Proven Accurate?
Back in 2018, economists forecasted that Brexit would leave the UK £100 billion worse off a year than if it remained in the EU.
A study by the National Institute of Economic and Social Research predicted GDP would be 3.9% lower by 2030 and estimated that the total trade between the UK and the EU would fall by 46%.
Despite the staggering numbers, British Prime Minister Rishi Sunak insisted the UK made “huge strides” in harnessing the freedoms unlocked by Brexit to tackle generational challenges.
“And in my first 100 days as prime minister, that momentum hasn’t slowed – we’re cutting red tape for businesses, leveling up through our freeports, and designing our own, fairer farming system to protect the British countryside,” Sunak said.
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
- Bank of England: We Will Raise Interest Rates Again
- A look at the German and Italian manufacturing sector
- Are We in a “Rolling Recession”? Rockin’ & Rollin’ Economy
- IMF: Global Economy Likely to Rebound, but UK’s Will Shrink in 2023
- UK Prime Minister Rishi Sunak Steps into Office Amidst Economic Crisis
Share this story