Britain's economy fell into a recession in the second half of 2023 on high inflation and a cost-of-living crisis, dealing a blow to prime minister Rishi Sunak before this year's election.
The office for National Statistics (ONS) said that gross domestic product (GDP) contracted by a worse-than-expected 0.3 per cent in the three months to December having shrunk by 0.1 per cent between July and September.
That places the economy in recession, which is defined as two successive quarters of falling GDP.
A Reuters poll of economists had pointed to a smaller 0.1 per cent fall in the October-to-December period.
The fall in GDP in the fourth quarter was the biggest since the first quarter of 2021, the ONS said.
The news delivers a major blow to Sunak, who has vowed to grow the economy as one of his top five priorities.
His governing Conservatives are currently trailing Keir Starmer's main opposition Labour Party ahead of a general election.
It also marks the UK's first recession since the first half of 2020, when the economy was slammed by fallout from the Covid pandemic.
"Our initial estimate shows the UK economy contracted in the fourth quarter of 2023," said ONS director of economic statistics Liz McKeown.
"While it has now shrunk for two consecutive quarters, across 2023 as a whole the economy has been broadly flat.
"All the main sectors fell on the quarter, with manufacturing, construction and wholesale being the biggest drags on growth."
In reaction to the data, chancellor Jeremy Hunt added that "high inflation is the single biggest barrier to growth".
The recession news data comes one day after separate official data showed that UK inflation held at 4.0 percent in January from December, or double the Bank of England's target rate.
Britain's economy has been stagnating for nearly two years. The Bank of England has said it expects it to pick up slightly in 2024.
"Businesses were already under no illusion about the difficulties they face, and this news will no doubt ring alarm bells for government," Alex Veitch, director of policy and insight at the British Chambers of Commerce, said.
"The chancellor must use his budget in just under three weeks' time to set out a clear pathway for firms and the economy to grow."
Hunt said there were "signs the British economy is turning a corner" and "we must stick to the plan – cutting taxes on work and business to build a stronger economy."
Media reports said Hunt was seeking to cut billions of pounds from public spending plans to fund pre-election tax cuts in his March 6 budget, if penned in by tight finances.
Economic output fell by 0.1 per cent in monthly terms in December after 0.2 per cent growth in November, the ONS said. The Reuters poll had pointed to a 0.2 per cent fall in December.
Simon Hannah
