The United Kingdom officially entered recession in the second half of 2023. According to data published by the British Office of National Statistics, Thursday February 15, gross domestic product (GDP) fell by 0.3% in the fourth quarter of 2023, after a fall of 0.1% in the previous three months. Two quarters of contraction in a row is the definition of recession.
In total, over the whole of 2023, the United Kingdom shows virtual stagnation, with very slight growth of 0.1%. With the exception of the Covid-19 pandemic, this is the worst result since the great financial crisis of 2009.
The entire euro zone is doing better (0.5% growth in 2023), as are France (0.9%), Italy (0.6%) and the astonishing Spain (2.5%). ) and Portugal (2.3%). All major sectors in the United Kingdom followed this downward slope in the last quarter: services (− 0.2%), industrial production (− 1%), construction (− 1.3%).
The sick country of Europe
With Germany, whose GDP fell by 0.3% over the whole of 2023, the United Kingdom thus confirms its place as a sick country in Europe. While in London on Monday February 12, Christian Lindner, the German Minister of the Economy, openly acknowledged this: ” The economic situation [entre les deux pays] is similar, but in the United Kingdom it is because of Brexit, while in Germany it is because of the sharp rise in interest rates and the energy shock. We were very dependent on cheap imports of fossil fuels from Russia. »
This is a shortcut. The United Kingdom is suffering, like the whole of Europe, from a very strong surge in inflation, caused by the end of the pandemic and the war in Ukraine. Legacy of the discovery of hydrocarbons in the North Sea in the 1970s, the country is very dependent on gas. The vast majority of individual heating and a third of electricity production run on this hydrocarbon. True, there were almost no imports from Russia before the war, but the shock to gas prices was the same across the continent, and its economic impact was therefore just as violent.
Faced with inflation, the Bank of England sharply increased its interest rates, from 0.1% to 5.25%. In the UK, where home loans have to be renegotiated every two to five years, this means that just over 100,000 households each month have to revise their borrowing upwards, with an increase in repayment amounts of around 4,000 euros per year.
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