Beautiful Virgin Islands

Tuesday, Jun 03, 2025

Things can only get even tougher, Chancellor warns as recession looms

Things can only get even tougher, Chancellor warns as recession looms

Recession on way as the big slowdown hits growth
Chancellor Jeremy Hunt steeled Britain for a wave of tax rises and swingeing spending cuts on Friday as new data showed that the nation was heading towards recession.

Preparing the ground for next week’s Autumn Statement, Mr Hunt warned that “extremely difficult decisions” were needed to restore confidence in the UK’s economy as soaring inflation bites into household budgets and rising interest rates choke off growth.

“It’s not going to be easy,” Mr Hunt said. “There are going to be some very difficult choices. I’ve used the word eye watering before, and that’s the truth.”

The Chancellor’s bleak assessment came after the Office for National Statistics said the UK’s output fell 0.2 per cent in the three months from July to September.

It dropped 0.6 per cent in September alone, although the fall was exaggerated by the impact of the extra bank holiday for the Queen’s funeral. Friday’s figures do not mean Britain is already in recession because the technical definition requires two consecutive quarters of falling GDP.

However, it is increasingly likely that the fourth quarter will see another dip following the surge in interest rates triggered by Kwasi Kwarteng’s disastrous mini-budget at the end of September, combined with rising energy costs, the cost-of-living crisis and plummeting consumer confidence.

Mr Hunt and Prime Minister Rishi Sunak will attempt to repair that damage on Thursday when they are expected to set out around £22 billion of tax rises and £33 billion of spending cuts to plug a fiscal black hole of about £55 billion.

As well as tax rises, the Chancellor is reported to be considering freezing day-to-day spending on public services from 2025-2028 to save £27 billion a year. But that has raised fears of a fresh wave of austerity, crippling already strained public services and a prolonged wave of strike action from public sector workers.

This week nurses voted to strike for the first time over pay. The Bank of England last week projected a two-year recession — the longest for a century — lasting until summer 2024 as it lifted the base rate to three per cent. The Bank warned that the UK economy faced “a very challenging outlook” although it said the recession would be relatively shallow.

The recession will not be confirmed until well into 2023 when the GDP figures for the fourth quarter are published by the ONS. It would be the third of the 21st century following the slumps caused by the global financial crisis and pandemic. Policymakers had hoped that Britain’s economy would bounce back strongly from the deep Covid-era falls in economic activity caused by three lockdowns and other restrictions.

However, this has been snuffed out by factors including global supply chain snarl-ups, spiking energy prices made worse by the war in Ukraine, Brexit problems and rapidly rising interest rates around the world to curb inflation. The lower than expected US inflation figure yesterday raised hopes that the worst of the cost-of-living crisis could be over.

Mr Hunt pointed to challenges being faced by other major economies and added: “What we need is a plan that shows how we are going to get through this difficult period. If it is a recession, how we make it shallower and quicker.”

Labour’s shadow chancellor Rachel Reeves blamed the Conservatives for their botched management of the economy. She said: “The reality of this failure is family finances crunched, British businesses left behind and more anxiety for the future.”

The ONS said the quarterly fall, which was slightly smaller than predicted by some City economists, was driven by manufacturing, which saw widespread declines across most industries. Services were flat overall.

Consumer-facing industries fared badly, with a notable fall in retail. Yael Selfin, chief economist at KPMG UK, said: “The current downturn is likely to last until the end of 2023, during which GDP is expected to shrink by 1.6 per cent.”
Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Mandelson Criticizes UK's 'Fetish' for Abandoning EU Regulations
British Fishing Boat Owner Fined €30,000 by French Authorities
Dutch government falls as far-right leader Wilders quits coalition
Harvard Urges US to Unfreeze Funds for Public Health Research
Businessman Mauled by Lion at Luxury Namibian Lodge
Researchers Consider New Destinations Beyond the U.S.
53-Year-Old Doctor Claims Biological Age of 23
Trump Struggles to Secure Trade Deals With China and Europe
Russia to Return 6,000 Corpses Under Ukraine Prisoner Swap Deal
Microsoft Lays Off Hundreds More Amid Restructuring
Harvey Weinstein’s Publicist Embraces Notoriety
Macron and Meloni Seek Unity Despite Tensions
Trump Administration Accused of Obstructing Deportation Cases
Newark Mayor Sues Over Arrest at Immigration Facility
Center-Left Candidate Projected to Win South Korean Presidency
Trump’s Tariffs Predicted to Stall Global Economic Growth
South Korea’s President-Elect Expected to Take Softer Line on Trump and North Korea
Trump’s China Strategy Remains a Geopolitical Puzzle
Ukraine Executes Long-Range Drone Strikes on Russian Airbases
Conservative Karol Nawrocki wins Poland’s presidential election
Study Identifies Potential Radicalization Risk Among Over One Million Muslims in Germany
Good news: Annalena Baerbock Elected President of the UN General Assembly
Apple Appeals EU Law Over User Data Sharing Requirements
South Africa: "First Black Bank" Collapses after Being Looted by Owners
Poland will now withdraw from the EU migration pact after pro-Trump nationalist wins Election
"That's Disgusting, Don’t Say It Again": The Trump Joke That Made the President Boil
Trump Cancels NASA Nominee Over Democratic Donations
Paris Saint-Germain's Greatest Triumph Is Football’s Lowest Point
OnlyFans for Sale: From Lockdown Lifeline to Eight-Billion-Dollar Empire
Mayor’s Security Officer Implicated | Shocking New Details Emerge in NYC Kidnapping Case
Hegseth Warns of Potential Chinese Military Action Against Taiwan
OPEC+ Agrees to Increase Oil Output for Third Consecutive Month
Jamie Dimon Warns U.S. Bond Market Faces Pressure from Rising Debt
Turkey Detains Istanbul Officials Amid Anti-Corruption Crackdown
Taylor Swift Gains Ownership of Her First Six Albums
Bangkok Ranked World's Top City for Remote Work in 2025
Satirical Sketch Sparks Political Spouse Feud in South Korea
Indonesia Quarry Collapse Leaves Multiple Dead and Missing
South Korean Election Video Pulled Amid Misogyny Outcry
Asian Economies Shift Away from US Dollar Amid Trade Tensions
Netflix Investigates Allegations of On-Set Mistreatment in K-Drama Production
US Defence Chief Reaffirms Strong Ties with Singapore Amid Regional Tensions
Vietnam Faces Strategic Dilemma Over China's Mekong River Projects
Malaysia's First AI Preacher Sparks Debate on Islamic Principles
White House Press Secretary Criticizes Harvard Funding, Advocates for Vocational Training
France to Implement Nationwide Smoking Ban in Outdoor Spaces Frequented by Children
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
Russia's Fossil Fuel Revenues Approach €900 Billion Since Ukraine Invasion
U.S. Justice Department Reduces American Bar Association's Role in Judicial Nominations
U.S. Department of Energy Unveils 'Doudna' Supercomputer to Advance AI Research
×