The Guardian view on the UK recession: no growth
and no ideas either
Editorial
The Conservatives have presided over a shrunken
British economy, and Rishi Sunak does not have a clue how to make it grow again
Thu 15 Feb
2024 18.36 GMT
“We’re on
the up!” claimed the Daily Express about the British economy on Thursday .
Sorry, loyal Conservative cheerleaders, but exactly the reverse is true.
Instead of being on the up, we’re on the slide. On Thursday, the Office for
National Statistics announced that the UK is in fact in recession, with a 0.3%
drop in gross domestic product for the last quarter of 2023 to follow a 0.1%
drop in the third quarter. The economy is therefore getting smaller. This is a
recession. It is a huge national blow, both economically and politically.
It is true
that the slide into recession has been a gentle one. Few economists believe
that the announcement portends a downward lurch to compare with the recession
of 1980 or the one after the financial crisis in 2009, when GDP fell by more
than 4%. Do not, though, be misled by talk of a “technical” recession. An
economy is either growing or it is not. Ours is not growing. It is shrinking.
It is also
true that an economy slipping into recession is not a uniquely British problem.
This week, Japan did the same, allowing Germany to replace it as the world’s
third largest economy (after the US and China). Germany itself hovers on the
threshold, while few European economies can expect anything much better than
stagnant growth in 2024. Britain, though, faces higher interest rates and
higher inflation than Germany and the eurozone, while its poor long-term
records on investment and wage growth leave the country particularly
ill-equipped to recover quickly.
In any
case, a shallow recession does not soften the serious blow for households.
Here, GDP per head is down for the seventh successive quarter, not the second.
The Resolution Foundation calculates that this is equivalent to a nearly £1,500
real-terms loss per household since the cost of living crisis accelerated after
Russia’s invasion of Ukraine. The same loss per household since 2009 now
amounts to around £23,000. With interest rates and inflation still high, the
pinch is set to get tighter still.
All this
would be serious enough merely for its effects on the national economy and on
individual living standards. But it will also shape the political battleground
in election year. At the start of 2023, Rishi Sunak promised, in one of his
five pledges, that his government would “grow the economy, creating better-paid
jobs and opportunity right across the country”. A year later, he has not grown
the economy. He has put it into reverse. It is hardly surprising that a newly
published Ipsos survey finds that more than two-thirds of British people say
the country is in decline – well above the average for the 28 nations covered
in the research.
The tragedy
is not merely that Mr Sunak has overseen this descent into recession. It is
also that he lacks any clue about how to extricate Britain from it. Before the
GDP figures were published on Thursday, the Treasury was already briefing that
Jeremy Hunt is considering slashing public spending to fund pre-election tax
cuts next month. Perhaps this was merely pre-byelection and pre-Budget
expectation management. But it embodies precisely what is wrong about this
government. It forgets nothing and learns nothing. It sacrifices the national
good for a political fetish that will leave public services even weaker than
they are already. No wonder the public think that the country is in decline. At least they now know who they should blame.
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