The UK economy contracted as people cut back on spending

People spending less, doctors' strikes and falling school attendance dragged England into recession late last year, official figures show.

After already contracting between July and September, the economy shrank by a better-than-expected 0.3% between October and December.

The UK is in recession if it fails to grow for two consecutive quarters.

Despite repeated requests, the government has never publicly said what steps are needed to assess if Mr Sunak's promise to „grow the economy” has been met.

In some private briefings to journalists, the sources said that the economy would be bigger between October and December compared to the previous three months.

But by that measure, Mr Sunak's promise was not fulfilled, as the UK economy shrank by 0.1% between July and September.

For the whole of 2023, the UK economy grew by 0.1%.

Yet, barring the Covid years, the year-on-year growth numbers have been the weakest since 2009, when the UK and other major economies were reeling from the global financial crisis and bank lending was virtually halted.

Shadow chancellor Rachel Reeves said the data showed Mr Sunak's pledge to boost the economy had „fallen flat”.

The Office for National Statistics (ONS) said there were many areas where the economy contracted at the end of the year. Shoppers spent less in December, taking advantage of Black Friday sales in November.

The health sector was hit by a strike by junior doctors, with school attendance falling by 1%.

Gross Domestic Product (GDP) is the main measure of all economic activity in a country by firms, government, public sector and individuals.

A growing GDP can be used as evidence that the government is doing a good job in managing the economy. Likewise, if GDP falls, opposition politicians may suggest that the government is treating it badly.

If GDP keeps rising steadily, people pay more taxes because they earn and spend more. This means more money for the government to choose to spend on public services such as schools, police and hospitals.

Governments also want to monitor how much they borrow in relation to the size of the economy.

Forecasts for public finances have worsened in recent weeks as interest costs on the UK government's debt have risen. Final decisions on the budget have not been taken.

Commenting on whether or not Mr Sunak had delivered on his pledge to grow the economy, Mr Hunt told the BBC: „When the Prime Minister made his pledge, tackling inflation had to come first.

„The big picture is that the economy has actually been more resilient since then, unemployment is low, real wages have been rising for six months now. Now if we stick to our guns, we can see light at the end of the tunnel. .”

Figures from earlier this week showed wage growth slowed but still outpaced inflation. Meanwhile, inflation – the rate at which prices rise – was lower than expected in January, with monthly food prices falling for the first time in two years. However, this is still double the Bank of England's 2% target.

Ruth Gregory, deputy chief UK economist at Capital Economics, said „this recession is as mild as it comes”, and added that the data was „politically more important than economically”.

However, Lord Ross, chairman of supermarket group Asda, told BBC Radio 4's Today programme: „It looks like a duck, it looks like a duck, it walks like a duck, it's a duck – it's a recession.

„There's no surprise here, and I'm not happy to say we're not surprised we're in it. We have a low-growth economy or no-growth economy.”

Official figures from the ONS show that in the final three months of last year, there was a slowdown in all key sectors that determine the health of the UK economy, including construction and manufacturing.

Mark Keyes, construction director at building firm Bennett, said last year had been „tumultuous”.

„We're still feeling the ripple effects of inflation in the industry, and then that, in a sense, coupled with rising interest rates,” he said.

The Bank of England has been raising interest rates to curb inflation, but has kept them at 5.25% since August last year.

Mr Hunt said: „When interest rates are high – the Bank of England can keep inflation down – low growth is no surprise.”

But he said he believed the economy was „turning a corner”, while Mr Keys said there were signs of optimism in the construction sector.

„I think you're looking at the beginning of the year compared to the beginning of last year, there's definitely an increase in inquiries,” he said. „I think there is an air of hope, even if there is a glimmer of light at the end of the tunnel.”