The UK is in recession – but for how long?

At the start of last year Rishi Sunak made the promise to ‘get the economy growing’ one of his five major pledges. Today he is confronted with headlines that the UK fell into recession at the end of last year, as the Office for National Statistics reported this morning that the economy contracted by 0.3 per cent between October and December 2023. This fall in the fourth quarter followed a fall of (an unrevised) 0.1 per cent in the third quarter. That’s two consecutive quarters of negative growth – the technical definition of recession.

Today’s revelation is going to spark debate about what constitutes a recession. The technical definition has been met, but do these economic contractions fit the typical model of recession? Most notably, the labour market remains remarkably strong. We saw just this week that, far from being characterised by mass redundancies or wage stagnation, unemployment remains near historic lows, there are over 900,000 job vacancies up for grabs, and wage hikes (while slowing slightly) are comfortably outpacing inflation right now.