Shrinking UK economy could signal start of recession, figures show

BRITAIN’S economy shrank in the second quarter, official data showed last Friday (12), as the country heads towards recession under a new prime minister.

The UK gross domestic product dropped 0.1 per cent in the April-June period after a rise of 0.8 per cent in the first quarter, the Office for National Statistics (ONS) said in a statement.

The Bank of England (BoE) expects the economy to enter a year-long recession by the end of 2022 as Britons endure a cost-ofliving crisis with inflation at its highest level in decades.

“With May’s growth revised down a little and June showing a notable fall, overall the economy shrank slightly in the second quarter,” said Darren Morgan, the ONS’s director of economic statistics. “Health was the biggest reason the economy contracted as both the (Covid) test and trace and vaccine programmes were wound down, while many retailers also had a tough quarter.”

Morgan said this was “partially offset by growth in hotels, bars, hairdressers and outdoor events, partly as a result of people celebrating the Platinum Jubilee” that marked the Queen’s 70 years on the throne.

The UK economy slumped 0.6 per cent in June, the ONS added.

Chancellor Nadhim Zahawi said he was “determined to work with the Bank of England to get inflation under control and grow the economy”.

Prime minister Boris Johnson, who last month announced he would step down on September 6 following a slew of scandals, is set to hand power to either Liz

Truss or Rishi Sunak after a summer-long Tory leadership battle.

Truss plans an emergency budget to lower taxes and to review the independent BoE’s inflation-fighting mandate.

But Sunak said tax cuts financed with more borrowing would force the bank to increase interest rates even more, insisting on the need to maintain fiscal rigour and tame price pressures first.