Home USA News Britain’s economy is shrinking as economists warn of more suffering

Britain’s economy is shrinking as economists warn of more suffering

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LONDON (AP) — Britain’s economy shrank in the three months to September, official statistics said Friday, as forecasters warned of months of contraction ahead.

The Office for National Statistics said gross domestic product fell 0.2% between July and September, a smaller-than-expected contraction that nevertheless signaled the start of a prolonged recession.

In September, the GDP decreased by 0.6 percent, in August – by 0.1 percent, according to the statistical office. It said lower production and extra holidays to mark the death of Queen Elizabeth II, which contributed to a “significant drop in retail sales”, were responsible for the fall.

It says the UK economy is now 0.2% smaller than it was in February 2020, just before the COVID-19 pandemic brought large parts of the economy to a halt for months.

The UK economy, like that of many other countries, is struggling as Russia’s invasion of Ukraine sent food and energy prices soaring, pushing consumer prices to a 40-year high.

The Bank of England raised its key interest rate last week by three-quarters of a percentage point to 3%, the biggest increase in three decades. The central bank said the move was necessary to tackle stubbornly high inflation, which is reducing living standards and likely to trigger a “prolonged” recession.

Britain’s financial situation worsened when then Prime Minister Liz Truss announced a huge package of unreasonable tax cuts on September 23. The package alarmed financial markets, sending the pound lower against the dollar and prompting the Bank of England to take action. stop the spread of the crisis.

Truss resigned less than a month later, leaving her successor, Prime Minister Rishi Sunak, and Treasury chief Jeremy Hunt to scrounge for billions in savings to shore up the country’s finances.

Hunt is due to make an emergency budget announcement next week, which is expected to include tax increases and government spending cuts. He said Friday’s figures showed that “extremely difficult decisions will have to be made to restore confidence and economic stability”. But to achieve long-term sustainable growth, we need to contain inflation, balance the books and achieve debt reduction. There is no other way.”

Nicholas Hayet, an analyst at investment firm Wealth Club, said the economic performance in the third quarter was “full of warning signs”.

“With consumers battening down the hatches ahead of a tough winter and the government proposing significant tax increases and spending cuts, we see the economy contracting again” in the fourth quarter, he said.

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