UK expected to have fallen into recession at the end of last year

The UK may have fallen into recession towards the end of last year, with official figures due to be released on Thursday expected to confirm this.

The Office for National Statistics (ONS) is expected to reveal that the UK economy shrank for the second quarter in a row in the final three months of 2023. Most economists predict a slight decline of 0.1 per cent in gross domestic product (GDP) between October and December.

This follows a 0.1 per cent contraction in the previous three months after an initial estimate of zero growth was revised downwards. This would result in the UK technically falling into a recession - defined by two or more quarters of falling GDP in a row.

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Ellie Henderson at Investec said: "Our base case is that the economy probably did tip into a recession, although this would be in the mildest of senses: a better description of the trend might be stagnation."

Ms Henderson added: “In all, we expect that it was a tough end to the year for the UK economy, but 2024 is likely to have got off to a better start as household budgets look to have loosened a little. Indeed, the decline in inflation combined with still high wage growth will continue to drive real household disposable incomes higher, a key factor behind the expected recovery this year.

“There will also be the added lift to post-tax incomes from the 2p cut to employees’ National Insurance Contributions, effective from January 6 – and, in all likelihood, more to come in the March Budget.”

Bank of England governor Andrew Bailey told the House of Lords Economic Affairs Committee: "In our February Monetary Policy Report, it was in the balance – we didn’t have a recession in the