Economy

Recession set to be confirmed and inflation up too in double blow to economy



  • Figures set to show inflation rose to 4.2% in January, up from 4% in December 
  • GDP looks to have shrunk by 0.1% in fourth quarter after 0.1% contraction in third
  • Blow to hopes of reviving growth and bringing cost of living squeeze to an end



Britain’s economy looks set for a double setback this week – with figures expected to confirm a recession at the end of last year and a rise in inflation at the beginning of 2024.

That would deliver a blow to ministers’ hopes of reviving growth and bringing the cost of living squeeze to an end as the election nears.

However, experts think the setbacks will prove temporary. And a business survey, from accountants BDO, suggests that output bounced back at the start of this year to its strongest level in 18 months.

Office for National Statistics figures, which will be published on Wednesday, are expected to show that inflation rose to 4.2 per cent in January as energy bills climbed, up from 4 per cent in December. 

Separate ONS data on Thursday is predicted to show that GDP shrank by 0.1 per cent in the fourth quarter of last year after a tough December of poor retail sales, public sector strikes and miserable weather.

That comes after a 0.1 per cent GDP contraction in the third quarter.

Two quarters in a row of negative growth is defined as a recession and this would be the first since the pandemic struck in 2020. 

Prime Minister Rishi Sunak acknowledged in a newspaper interview over the weekend that ‘we want growth to be higher’ but pointed out that the long and deep recession feared when he came to power had not come to pass.

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Instead, Britain’s performance – while sluggish – has until now steered clear of a downturn and outpaced that of struggling Germany.

Paul Dales, of Capital Economics, said Britain looks set to enjoy a so-called ‘soft landing’, meaning inflation comes down without the economy crashing. 

‘The good news is that any recession will be tiny and may already be nearing an end,’ he added.

‘We think the economy will recover over the coming quarters.’

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