PwC comments on December 2023 ONS GDP data

Barret Kupelian, Chief Economist at PwC UK, said: 

“The UK was in a technical recession at the end of last year. Does this really matter? 

“From a confidence signalling point of view, yes. The contraction was larger than consensus estimates. From a macroeconomic perspective though, no, as it is another timely reminder that UK growth has flatlined, teetering between months of expansion and contraction for some time now.  

“Compared to peers, we now know that the economy grew marginally by 0.1% in annual average terms last year, which is second from the bottom compared to the other G7 countries. The more detailed picture for the fourth quarter shows that consumers held back on spending, despite positive news on inflation and real wages starting to grow. The production and construction sectors of the economy also contracted. 

“What does the economy hold for 2024? Leading indicators suggest business activity picked up significantly in the beginning of the year, which should translate to better real economic data for the beginning of the calendar year. Some of this momentum is likely to be seen in the Office for Budget Responsibility’s (OBR’s) forecasts, finalised yesterday, which could help sustain some of the fiscal headroom. With this in mind, we expect this episode to be one of the shallowest recessions of modern times, as it does not reflect a sharp and protracted downturn in response to a specific set of adverse economic circumstances.  

“However, the elephant in the room remains unaddressed, which is that Britain’s post-COVID, post-Brexit economy is struggling to discover its joie de vivre, with growth rather anaemic compared to recent memory and against our main competitor, the Eurozone.”