- Toward the end of last year, the country’s money-making power went down by 0.3%, which was bad news for Rishi Sunak’s plans to win votes.
- The UK’s economy was doing so poorly by the end of last year that it officially fell into what’s called a “technical recession.” This was a big problem for Rishi Sunak because he promised to make the economy better, but things kept getting worse, especially with people struggling to afford things and businesses not doing well.
- The amount of money the UK made (Gross Domestic Product or GDP) dropped by 0.3% in the last three months of 2023, after going down by 0.1% in the three months before that. This information comes from the Office for National Statistics.
- These bad numbers make it hard for Jeremy Hunt, who has to decide on cutting a lot of government spending to pay for tax cuts before the election. Even though people were hoping for tax cuts, now they might not happen because things are so bad financially.
- The Labour Party said the Prime Minister’s promises about the economy were now worthless. They basically said, “The Prime Minister can’t say his plan is working or that he’s fixed the economy after 14 years of things getting worse under the Conservatives.”
This was the largest monthly rise since April 2021 and returned volumes to November 2023 levels.
- But Hunt still believes there’s hope for the economy.
- He said, “Experts think the economy will get better in the next few years. People’s wages are going up faster than prices, and fewer people are losing their jobs.”
- If you look at how many people live in the UK, the situation looks even worse. The amount of money made per person dropped by 0.7% in 2023, and it hasn’t grown since the start of 2022.
- Usually, when the country’s money-making power goes down for two quarters in a row, it’s called a recession. But some experts think it’s more like the economy is just stuck without any real improvement.
- US Inflation
- A guy named James Smith from the Resolution Foundation says the UK is in a recession, and things are getting even worse for regular people.
- But Andrew Bailey, who’s in charge of the Bank of England, says we shouldn’t worry too much about the recession. He thinks it won’t last long and won’t hurt too badly.
- Now, people are betting that the Bank of England will lower interest rates three times this year, and there’s a 65% chance they’ll do it by June.
- The interest rates on some UK government bonds stayed about the same, while the stock market went up a bit. The British pound also went up a little against the US dollar.
- Before all this happened, experts thought the economy would only shrink by 0.1% in the last part of the year because of high borrowing costs, inflation, and strikes.
- The UK’s economy barely grew at all in 2023. It only got 0.1% bigger, which is way less than the US and Europe.
- This bad news comes as the Conservative Party might lose two seats in upcoming elections.
- The Office for National Statistics says everything that makes money in the UK did worse at the end of the year, except for hotels, car rentals, and stuff like that.
- The country sold less stuff overseas, people spent less money, and the government spent less too, but businesses did invest more.
- In December, the UK made 0.1% less money than it did in November, which wasn’t as bad as what experts thought would happen.
- A guy from Deutsche Bank says the drop in the economy at the end of the year was much worse than what the Bank of England expected.
- He thinks there’s a lot more room for the economy to grow than the Bank of England thought, especially with interest rates being so high.
- The Bank of England now thinks the economy will grow by 0.25% in 2024, which is better than what they thought before. They expect it to grow by 0.75% in 2025.
- This news about the economy comes after we found out that prices didn’t go up as much as we thought they would in January.
- But even though prices didn’t go up much, people’s wages still went up a lot, which could cause prices to keep going up.