Britain’s Economy Shrinks as Threat of Recession Nears

The recession predicted by the nation's central bankers may be starting after the British economy shrank over the summer.

The Office for National Statistics said on Friday that gross domestic product fell by 0.2 percent in the third quarter.

Britain's output remained below its prepandemic level because of the broad slowdown. The drop off was particularly sharp in September, which was affected by the death of Queen Elizabeth II.

Britain is suffering from both rising inflation and slowing growth. Fuel, food and fertilizer prices have gone up because of the war in Ukraine and the sanctions against Russia. Economic difficulties have been worsened by supply chain disruptions caused by the Pandemic and ongoing Covid-19 lockdowns in China, as well as shifting consumer preferences and climate- related disasters.

The annual inflation rate in Britain reached a 40-year high in September and is expected to rise even more before peaking. People who are anxious about being able to afford to heat and light their homes are the focus of call-in radio shows.

The Bank of England is determined to stop the upward march even if it means raising interest rates. The bank predicted last week that the British economy would contract in the second half of this year and then shrink until the middle of the next decade.

A recession is a period of decline in economic activity.

Higher interest rates make borrowing money for mortgages and investments more expensive and can increase unemployment.

Britain's economy is suffering from self- inflicted wounds by the Conservative Party. Liz Truss, the former prime minister, proposed an economic plan that included steep, unfunded tax cuts and big spending increases to help households afford rising energy bills.

There was political and economic instability that led to a policy reversal. Tax increases, spending cuts and debt reduction are expected to be included in the economic game plan to be announced by the new prime minister and the chancellor of the Exchequer next week.

The package will reinforce Britain's gloomy economic outlook.

There are other signs that the economy is not doing well. Across London, Christmas lights are going up, but fewer consumers visited shopping centers and main streets as compared with the previous week. Businesses are reporting a decline in orders while consumer confidence is near a record low.

There was a decrease in the number of people looking to buy a house. 2.5 million people are out of work because of long-term illnesses, which has left employment below it's pre-pandemic level.

Britain's economy is not doing as well as other European countries. The euro countries' growth averaged 0.2 percent over the last three months of the year.

Pantheon said in its daily newsletter that the U.K. economy has slipped to the back of the G7 pack again.