Labour says Sunak’s promise to grow economy ‘in tatters’ as UK slips into recession

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Labour’s shadow chancellor Rachel Reeves has lambasted the federal government as the UK economy has formally entered a technical recession.

Gross home product (GDP) fell by 0.3% within the fourth quarter, following a decline of 0.1% within the earlier three months, in accordance to the Office for National Statistics figures launched on Thursday morning.

Labour stated the announcement exhibits the prime minister can “no longer credibly claim that his plan is working”, and that “Rishi Sunak’s promise to grow the economy is now in tatters”.

“This is Rishi Sunak’s recession and the news will be deeply worrying for families and business across Britain,” the shadow chancellor stated. “It is time for a change. We need an election now to give the British people the chance to vote for a changed Labour Party that has a long-term plan for more jobs, more investment and cheaper bills. Only Labour has a plan to get Britain’s future back.”

Economists stated the recession is probably going to be short-lived, with GDP anticipated to decide up from the beginning of 2024. But the figures are damning for Mr Sunak, who has vowed to grow the economy as certainly one of his 5 priorities.

Todays statistics present that GDP per individual dropped each quarter of 2023, having now development since Q1 2022 – making the longest unbroken run with out per capita GDP development since data started.

Chancellor Jeremy Hunt stated the contraction comes off the again of excessive inflation and the current run of rate of interest rises, however insisted the economy was turning a nook. He stated it was the “right thing to do” to prioritise tackling inflation.

The Chancellor instructed broadcasters: “We always expected growth to be weaker while we prioritised tackling inflation, that means higher interest rates, and that is the right thing to do because you can’t have long-term healthy growth with high inflation.

“The underlying picture here is an economy that is more resilient than most people predicted, inflation is coming down, real wages have been going up now for six months.

“If we stick to our guns, independent forecasters say that by the early summer we could start to see interest rates falling and that will be a very important relief for families with mortgages.”

On Wednesday the prime minister had insisted the “economy has turned the corner” as he convened the primary assembly of his 2024 Business Council.

Mr Sunak made the assertion as information, additionally from the ONS, confirmed the inflation fee sticking at 4 per cent on the 12 months in January, unchanged from December. Though double the Bank of England’s inflation goal, it was higher information than anticipated, after economists predicted an uptick to 4.2 per cent.

Mr Sunak stated he was “unashamedly pro-business” as he spoke to chief executives in Downing Street on Wednesday morning.

Addressing the council, the prime minister stated he was “determined” to “make the UK the best place in the world to start to grow and invest in businesses”.

The recession places strain on the federal government to mirror on its financial strategy, as the Financial Times reported that Mr Hunt continues to be contemplating slashing billions of kilos from public spending plans to fund pre-election tax cuts. Mr Hunt is reportedly mulling over lowering projected spending rises to about 0.75 proportion factors a 12 months, releasing £5bn-£6bn for tax cuts.

Left-leaning suppose tank Institute for Public Policy Research stated the financial recession needs to be a wake-up name for the federal government.

Pranesh Narayanan, analysis fellow on the Institute for Public Policy Research (IPPR) has stated the figures underscore the necessity for public funding, somewhat than “irresponsible tax cuts”.

“This time last year, the Prime Minister pledged to get the economy growing but today’s data, showing a mild technical recession, shows a stark lack of progress,” Mr Narayana stated. “Chronic underinvestment in hospitals, schools, net zero and infrastructure has created a crumbling public realm and a broken economy.

“This should be a wake-up call that spurs the Government to prioritise public investment rather than irresponsible tax cuts. Let’s fix our problems now rather than storing them up for later.”

Asda chairman Lord Rose instructed BBC’s Radio 4 Today programme: “If it looks like a duck, it quacks like a duck, it walks like a duck, it’s a duck. It’s a recession. It doesn’t matter whether it’s a technical recession or not.”

He added: “I take no pleasure in saying there’s no surprise here. We’ve got a low growth economy or a no growth economy. We’ve got very low productivity. We’ve got very stubborn and persistent inflation, which is still twice to the bank’s target, and we have got 2.9 million people in this country who are economically active and yet we’ve got a tight labour market. It doesn’t add up and we must now find a route to grow the country and we haven’t found that route yet.

“Cutting your way to growth, in my view, as a businessman, is almost impossible.”

Martin McTague, nationwide chairman of the Federation of Small Businesses (FSB), stated information of the technical recession “will just confirm what many small firms have been saying for some time now – it’s very tough out there”.

He added: “The Government needs to foster an environment where small firms can grow, to the overall benefit of the economy, and to put this period of stagnation and shrinkage behind us once and for all.”

Joseph Rowntree Foundation chief economist Alfie Stirling stated though enterprise funding will be the “lifeblood” of the rising economy, public service and social safety funding should “provide the heartbeat”.

He added: “Just weeks before the Budget, addressing this crisis of economic security, from individual families to the nation as a whole, must be the first priority for policymakers. This starts with reforming Universal Credit to reflect the actual cost of essentials, and a revitalisation of key services across care, housing, and job support.

Meanwhile, TUC general secretary Paul Nowak blamed the Conservatives’ “economic failures” for the technical recession:

“The Conservatives’ economic failures are hitting jobs and living standards. With household budgets at breaking point, spending is down and the economy is shrinking. At the same time our crumbling public services are starved of much-needed funding.

He added: “After being in power for 14 years, the Tories have driven our economy into a ditch and have no idea how to get out.

Liberal democrat leader Ed Davey said that “Rishi’s recession” has “savaged the British economy by decimating growth and leaving families to cope with spiraling prices.”

“Years of Conservative chaos and a revolving door of Conservative chancellors has culminated in economic turmoil,” he added. “It’s hardworking Brits forced to pick up the tab for this mess, through high food prices, tax hikes and skyrocketing mortgage bills.”