UK economy shrinks at start of feared long recession - Reuters UK

LONDON, Nov 11 (Reuters) - Britain's system shrank successful the 3 months to September astatine the commencement of what is apt to beryllium a lengthy recession, underscoring the situation for concern curate Jeremy Hunt arsenic helium prepares to rise taxes and chopped spending adjacent week.

Economic output shrank by 0.2% successful the 3rd quarter, little than the 0.5% contraction analysts had forecast successful a Reuters poll, Friday's authoritative information showed.

But it was the archetypal autumn successful gross home merchandise since the commencement of 2021, erstwhile Britain was inactive nether choky coronavirus restrictions, arsenic households and businesses conflict with a terrible cost-of-living crisis.

Britain's system is present further beneath its pre-pandemic size - it is the lone Group of Seven system yet to retrieve afloat from the COVID slump - and is smaller than it was 3 years agone connected a calendar-quarter basis.

The Resolution Foundation deliberation vessel said that though the autumn was smaller than investors had feared, it near Britain connected people for its fastest instrumentality to recession since the mid-1970s.

Its probe manager James Smith said the figures provided a sobering backdrop for Hunt's Nov. 17 fund announcement, erstwhile helium volition effort to person investors that Britain tin hole its nationalist finances - and its credibility connected economical argumentation - aft Liz Truss's little spell arsenic premier minister.

"The Chancellor volition request to onslaught a equilibrium betwixt putting the nationalist finances connected a sustainable footing, without making the cost-of-living situation adjacent worse, oregon hitting already stretched nationalist services," Smith said.

Responding to the data, Hunt repeated his warnings that pugnacious decisions connected taxation and spending would beryllium needed.

"I americium nether nary illusion that determination is simply a pugnacious roadworthy up - 1 which volition necessitate highly hard decisions to reconstruct assurance and economical stability," Hunt said successful a statement.

"But to execute long-term, sustainable growth, we request to grip inflation, equilibrium the books and get indebtedness falling," helium added. "There is nary different way."

RECESSION REALITY

The Bank of England said past week that Britain's system was acceptable to spell into a recession that would past 2 years if involvement rates were to emergence arsenic overmuch arsenic investors had been pricing.

Even without further complaint hikes, the system would shrink successful 5 of the six quarters until the extremity of 2023, it said.

"Fears of a recession are turning into reality," Suren Thiru, economics manager for the Institute of Chartered Accountants successful England and Wales, said.

"This autumn successful output is the commencement of a punishing play arsenic higher inflation, vigor bills and involvement rates clobber incomes, pushing america into a method recession from the extremity of this year."

In September alone, erstwhile the ceremonial of Queen Elizabeth was marked with a one-off nationalist vacation that unopen galore businesses, Britain's system shrank by 0.6%, the Office for National Statistics said. That was a bigger monthly autumn than a median forecast for a 0.4% contraction successful the Reuters canvass and the largest since January 2021, erstwhile determination was a COVID-19 lockdown.

But gross home merchandise information for August was revised to amusement a marginal 0.1% contraction compared with an archetypal speechmaking of a 0.3% shrinkage, and GDP successful July was present seen arsenic having grown by 0.3%, up from a erstwhile estimation of 0.1%.

The upward revisions to July and August's GDP information mostly reflected new, quarterly figures connected wellness and acquisition output, alongside immoderate stronger readings from the nonrecreational and technological and wholesale and retail sectors, the ONS said.

Reporting by William Schomberg and David Milliken; Editing by Kate Holton and Catherine Evans

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