LONDON (AP) 鈥� Britain鈥檚 economy shrank in the three months to September, official statistics said Friday, as forecasters warned of many months of contraction to come.
The Office for National Statistics said gross domestic product fell by 0.2% between July and September, a smaller-than-expected contraction that nevertheless is seen to signal the start of a long recession.
GDP shrank by 0.6% in September, and by 0.1% in August, the statistics office said. It said a decline in manufacturing output and an extra holiday to mark the death of Queen Elizabeth II, which contributed to 鈥渁 notable fall in retail,鈥� were behind the decline.
It said the U.K. economy is now 0.2% smaller than in February 2020, just before the COVID-19 pandemic shut down big chunks of the economy for months.
Britain鈥檚 economy, like that of many other countries, is struggling as Russia鈥檚 invasion of Ukraine has , pushing consumer price inflation to 40-year highs.
Martin McTague, national chairman of the Federation of Small Businesses, said the fall in GDP 鈥渋s one headline figure made up of countless bits of disappointing news for small businesses across the country 鈥� a new venue or premises they couldn鈥檛 open, a contract which ended unexpectedly, a staff member they had to let go.鈥�
The Bank of England last week by three quarters of a percentage point, to 3% 鈥� its biggest increase in three decades. The central bank said the move was needed to beat back stubbornly high inflation that is eroding living standards and is likely to trigger a 鈥減rolonged鈥� recession.
The U.K.'s finances worsened when then-Prime Minister Liz Truss announced a huge on Sept. 23. The package alarmed financial markets, sent the pound to a record low against the dollar and forced the Bank of England to step in to stop the crisis from spreading.
less than a month later, leaving her successor, Prime Minister , and Treasury chief Jeremy Hunt to find billions in savings to shore up the nation鈥檚 finances.
Hunt is due to make an emergency budget statement next week that is expected to include both tax increases and public spending cuts. He said Friday鈥檚 figures showed that there would need to be 鈥渆xtremely difficult decisions to restore confidence and economic stability. But to achieve long-term, sustainable growth, we need to grip inflation, balance the books and get debt falling. There is no other way.鈥�
Nicholas Hyett, equity analyst at investment firm Wealth Club, said the economy鈥檚 third-quarter performance was 鈥渇ull of warning signs.鈥�
鈥淲ith consumers battening down the hatches for a tough winter and the government proposing substantial tax rises and spending cuts, we think the economy will shrink again鈥� in the fourth quarter," he said.
Jill Lawless, The Associated Press
