The UK narrowly avoided falling into recession in 2022, new figures show, after the economy saw zero growth between October and December.
This is despite a sharp 0.5% fall in economic output during December, partly due to strikes across health, transport and the postal service.
Chancellor Jeremy Hunt said the figures show “underlying resilience” but said “we are not out of the woods”. The Bank of England still expects the UK to enter recession this year. But it will be shorter and less severe than previously thought.
Mr Hunt said that high inflation remains a problem and continues to cause “pain for families up and down the country”.
Inflation – or the rate at which prices are rising – is slowing but at 10.5% remains close to a 40-year high.
The Office for National Statistics, which published the figures, said there was no economic growth in the final three months of 2022.
It also revised up its figures for July and September to show that the economy shrank by 0.2% instead of previous estimates of a 0.3% fall.
A recession is defined as when the economy contracts for two consecutive three-month periods.
The figures for December, however, were worse than expected.
Darren Morgan from the ONS said there was a fall in health services with fewer operations and GP visits. He also said that sporting activities, particularly football, were impacted because of the World Cup.
He people were not “able to enjoy top flight football due to the absence of Premier League football until Boxing Day, as the World Cup continued”.
“And finally rail and postal industries had a poor month. We certainly saw the impact of strikes as both fell heavily in December,” he said.
Strike action on trains caused disruption on the railways and on the roads in December. Postal workers also went on strike on a series of days in the run-up to Christmas.
Over 2022, gross domestic product (GDP) grew by 4% – the biggest increase of all G7 nations for last year.
However that compares to 7.6% growth in the previous year and the UK economy is still 0.8% smaller than it was before the Covid pandemic.
Rachel Reeves, Labour’s shadow chancellor, said the latest figures show the economy “is stuck in the slow lane”.
She added: “We must bring in urgent measures to prevent yet more harm from the cost of living crisis, using a proper windfall tax on oil and gas giants to stop the energy price cap going up in April so that people have more money in their pockets.”
Liberal Democrat MP Sarah Olney, said: “Britain is dangling on over the edge of a recession after months of economic vandalism and chaos in Government.
“The blame for these gloomy figures lies squarely with the government, who have botched budgets, failed to tackle inflation and have no plan for growth.”
NEWS ANALYSIS
Zero growth over the final three months of last year will not be an occasion for getting the bunting out at the Treasury. It does mean there was no official recession in 2022 but the news here is what happened in December – a significant 0.5% fall in the economy.
The Office for National Statistics points to the impact of strikes in the health service and the World Cup delaying the normal football season among other factors. Clearly, the first of those factors could also weigh into this year.
The good news has been that most forecasters now predict 2023 will see a milder downturn than previously expected because of a fall in energy prices.
But the UK is exposed here. The UK economy is more sensitive to gas prices, to rising interest rates and has a specific issue about the failure of the workforce to return to its pre-pandemic size.
Today’s numbers and the early evidence from this year could still pile on the pressure for the government to do more over the workforce and over the further rise in domestic energy bills coming in the spring.
Economists are divided on whether the UK will enter or avoid an economic downturn.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said there was some “relief” but warned tough times lie ahead.
“There is still a chance the economy will still suffer two back-to-back quarters of negative growth this year,” she said.
“But the murky stretch of water ahead is set to be shallower and less lengthy than predicted in the Autumn when the country was also wracked with financial instability.”
The National Institute of Economic and Social Research, an economic think tank, forecast that the UK will swerve a technical recession.
But both the Bank of England and the International Monetary Fund expect the UK economy to shrink in 2023.
