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| UK economy set to shrink but avoid recession | |
| (about 1 hour later) | |
| The UK is expected to avoid a technical recession in 2023, Jeremy Hunt tells the Commons. | The UK is expected to avoid a technical recession in 2023, Jeremy Hunt tells the Commons. |
| The UK is expected to avoid a technical recession in 2023, Jeremy Hunt tells the Commons. | The UK is expected to avoid a technical recession in 2023, Jeremy Hunt tells the Commons. |
| The UK economy will avoid a recession this year although it is still expected to shrink, according to the chancellor. | |
| The government's independent forecaster thinks the economy will contract by 0.2% this year. | |
| Inflation - the rate at which prices rise - is expected to more than halve to 2.9% by the end of this year, the Office for Budget Responsibility said. | |
| But Labour criticised the announcements made during the Budget as "dressing up stagnation as stability". | |
| The Office for Budget Responsibility (OBR) predicted that real household disposal income per person will fall by 6% this financial year and next. | |
| This would represent "the largest two-year fall in living standards since records began in the 1950s," said OBR chairman Richard Hughes. | |
| "We think households are going to dip into some of their savings to help manage the squeeze on living standards and that supports growth in the near term," he added. | |
| The OBR warned living standards would not recover to pre-pandemic levels until at least 2027. | |
| Budget 2023: Key points at-a-glance | Budget 2023: Key points at-a-glance |
| What the Budget means for you and your money | What the Budget means for you and your money |
| Tax on company profits to rise to 25% next month | Tax on company profits to rise to 25% next month |
| The OBR looks at the government's tax and spending plans in the Budget and then predicts how the country will perform over the next five years. | |
| Previously it had forecast that the UK would enter a recession in 2022 and shrink by 1.4% in 2023. | |
| But it has now revised this year's forecast to a 0.2% contraction and does not expect the UK to fall into a recession, which is defined as two three-month periods of economic decline in a row.. | |
| The OBR then predicts the economy will grow by 1.8% in 2024, 2.5% in 2025 and 2.1% in 2026. | |
| 'Out of touch' | |
| Independent research group the Institute for Fiscal Studies (IFS) said the economic picture had not changed "enormously since the autumn". | |
| IFS director Paul Johnson said the OBR "expects the economy to grow a bit faster in the short-term, and a bit slower in the medium-term". | |
| This would combine to create an economy that was "0.6% larger in real-terms in 2027-28 than under the autumn forecast," he said. | |
| Chancellor Jeremy Hunt said the prediction from the OBR was "proving the doubters wrong". | |
| But Labour leader Sir Keir Starmer accused the government of being "out of touch" and putting the country "on a path of managed decline". | |
| How can we avoid a recession and still shrink? | How can we avoid a recession and still shrink? |
| The chancellor has announced that the economy will avoid a "technical recession" this year, but that doesn't mean we're out of the woods. | The chancellor has announced that the economy will avoid a "technical recession" this year, but that doesn't mean we're out of the woods. |
| The size of the economy - the value of everything we make and produce this year - is set to fall by about 0.2% according to the chancellor's figures. | The size of the economy - the value of everything we make and produce this year - is set to fall by about 0.2% according to the chancellor's figures. |
| It becomes a "technical recession" if the economy shrinks for two seasons (three-month periods) in a row. So it's possible to avoid the technical definition even if the economy is doing badly if it shrinks in the spring and autumn but rises in the summer. | It becomes a "technical recession" if the economy shrinks for two seasons (three-month periods) in a row. So it's possible to avoid the technical definition even if the economy is doing badly if it shrinks in the spring and autumn but rises in the summer. |
| A forecast of a 0.2% shrinkage may be better than we thought last autumn (shrinking by 1.4%) but it's hardly anyone's definition of doing well. | A forecast of a 0.2% shrinkage may be better than we thought last autumn (shrinking by 1.4%) but it's hardly anyone's definition of doing well. |
| The chancellor also said the UK was on track to meet the government's self-imposed fiscal rules. | The chancellor also said the UK was on track to meet the government's self-imposed fiscal rules. |
| According to these rules, government debt must be falling as a percentage of economic output in five years' time and the budget deficit must be below 3% of gross domestic product over the same time period. | According to these rules, government debt must be falling as a percentage of economic output in five years' time and the budget deficit must be below 3% of gross domestic product over the same time period. |
| Related Topics | Related Topics |
| Economics | Economics |
| UK economy | UK economy |
| Jeremy Hunt | Jeremy Hunt |
| Budget 2023 | Budget 2023 |