The British economy contracted in August, shrinking by 0.3 per cent on the previous month.
The Office for National Statistics released its latest reading on the UK’s performance as the government fears the prospect of recession ahead, given the toll placed on demand by the cost of living crisis.
The latest data means the economy is on track to contract overall in the third quarter, with the ONS confirming there would need to be growth of more than 1 per cent in September to prevent a quarterly decline.
The ONS said there has been a continued slowing in three-month on three-month growth, with gross domestic product (GDP) falling by 0.3 per cent in the quarter to August.
Action by the Bank of England to tame inflation, through successive interest rate increases, is adding to the cost burden for borrowers.
Business secretary Jacob Rees-Mogg told Sky News that the 0.3 per cent contraction was “a small amount in a very large economy” and said “lots of figures come out that get revised later”.
Chancellor Kwasi Kwarteng said: “Countries around the world are facing challenges right now, particularly as a result of high energy prices driven by Putin’s barbaric action in Ukraine.”
He added: “Our growth plan will address the challenges that we face with ambitious supply-side reforms and tax cuts, which will grow our economy, create more well-paid skilled jobs and in turn raise living standards for everyone.”
The International Monetary Fund criticised the UK government again warning that Britain was on course for a sizeable slowdown in growth from 3.6 per cent this year to 0.3 per cent in 2023 but said its forecasts had been made before Kwarteng delivered his mini-budget on 23 September.
“The fiscal package is expected to lift growth somewhat above the forecast in the near term, while complicating the fight against inflation,” the IMF said. Financial markets expect Threadneedle Street to raise interest rates – currently at 2.25 per cent – by at least 0.75 percentage points at its next meeting in early November.
On Monday the chancellor announced he was bringing forward the date of his debt cutting plan, which will be published alongside new forecasts from the Office for the Budget Responsibility, to 31 October from 23 November.
The pound has plunged again after governor of the Bank of England Andrew Bailey warned that its emergency support package for the markets would end on Friday.
Earlier on Tuesday the Bank intervened for the second time in as many days to prevent “fire sales” of pension fund assets, amid the continuing market turmoil in the wake of Chancellor Kwasi Kwarteng’s mini-budget.
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