UK in recession: Government ‘has no coherent policy to grow economy’ says Cambridge Judge Business School expert

The government “has no coherent policy to grow the economy”, warned a Cambridge Judge Business School economics expert following the news that the UK is now in recession.

A recession is defined by two or more quarters in a row of falling gross domestic product (GDP). The UK fell into recession at the end of 2023 after a bigger-than-forecast contraction in the final three months.

The data from the Office for National Statistics (ONS) estimated that gross domestic product (GDP) fell by 0.3 per cent in the fourth quarter, following a decline of 0.1 per cent in the previous three months.

It marks the first time the UK has entered recession since the first half of 2020, when the initial Covid-19 lockdown sent the economy plunging, and comes after households and businesses were battered by ongoing cost pressures and a lengthy run of interest rates that took base interest rate to 5.25 per cent – the highest level since 2008.

This heaped further cost pain on millions of mortgage borrowers, with all but the most in need seeing no energy bill or cost of living support this winter from the government. This has led to a spending clampdown, which has hit the housing market and consumer-facing sectors hard.

Construction firms, retailers and hospitality companies are among those that have suffered the most in recent months.

The figures deal a blow to Prime Minister Rishi Sunak, who has promised to grow the economy as one of his five priorities.

And it could not come at a worse time for the Conservative government, ahead of an impending General Election.

While some economists have posited that this recession could prove short-lived, but Michael Kitson, associate professor in international macroeconomics at Cambridge Judge Business School, suggests otherwise.

“Although the importance of the latest figures should not be exaggerated - especially as they are often revised - the data adds to the broader picture of economic malaise in the UK,” Prof Kitson said. “According to the International Monetary Fund, the UK economy is expected to grow by only 0.6 per cent in 2024, well below the growth rate of 1.5 per cent for all the advanced economies.

“The Bank of England may give the economy a minor boost by reducing interest rates in 2024, but it must be emphasised that the bank’s remit is to control inflation and not to stimulate growth.

“Also, the government has no coherent policy to grow the economy although it may resort to some tax cutting in advance of the General Election to curry favour with the voters.”

Chancellor Jeremy Hunt insisted the government’s approach had been the right one.

He told the BBC: “When the Prime Minister made his commitment he was very clear that tackling inflation had to come first… If we stick to our guns now, we can actually see light at the end of the tunnel.”