UK

It’s a recession!

BY DAN BLOOM

FEBRUARY 15, 2024 

Good Thursday morning. This is Dan Bloom.

IT’S A RECESSION! GDP fell 0.3 percent in the last three months of 2023, ONS figures released just now show — and we all know what that means. It’s the second shrinkage in a row (having fallen 0.1 percent the previous quarter), meaning the U.K. officially tipped into recession last year.

Man the barricades! It’s the one headline Prime Minister Rishi Sunak (who put “growing the economy” at the heart of his five pledges) really didn’t need. Chancellor Jeremy Hunt will be hitting the airwaves to defend the PM’s plan. He’s due to be interviewed this morning by an [insert collective noun here] of economics editors, including the BBC’s Faisal Islam and Sky’s Ed Conway. Expect lots of talk about global headwinds and whatnot.

STUPID ECONOMY: The first recession since the COVID-19 pandemic is an unenviable story for any government to deal with, and the R-word will cut through to the voting public. But it’s also true that this is a recession far milder than the Bank of England once predicted, and that the slightest upward shift in numbers would’ve reversed the news line. Not for nothing did government officials (and, well, Playbook) draft two statements in advance, Boris Johnson-style.

That’s why … Playbook hears some senior officials have read with interest the musings of the FT’s Chris Giles, who is in (to paraphrase) the “let’s ditch this stupid definition of a recession” camp.

The bad news: The alternative word for it is … er … “stagnation.” Which doesn’t sound fab either. The BBC sums up nearly two years of measly growth figures in charts here, and Shadow Chancellor Rachel Reeves should be sticking the boot into the flat-as-pancake-day economy shortly. Spare a thought for Liz Truss.

Cheer up! It does get better. The OECD projects growth will pick up to 0.7 percent this year and 1.2 percent in 2025, which is more than France and Germany though less than Spain, Canada and Australia.

GRID OF SH*T UPDATE: Things could be worse. Tory plotters had warned we might see inflation rise on Wednesday, recession on Thursday and two by-election defeats on Friday. So far it’s only one out of two, and an unexpectedly appalling week for the Labour Party has taken some focus off Sunak. We will, however, find out about the by-elections overnight.

PROPHETS OF GLOOM: It’s all warm-up for the March 6 budget. The i splashes on Bank of England Governor Andrew Bailey warning interest rates won’t come back to their pre-Covid rock bottom … while Hunt is looking at paring back public spending rises to just 0.75 percentage points a year after 2025 to pay for tax cuts, as the FT splash reports. Quite the trap for Labour.

SCOOP — SAVE THE DATE: Here’s a decent budget bet. Hunt met industry figures on Wednesday to discuss raising the £20,000 tax-free ISA savings limit, POLITICO’s ace new U.K. finance reporter James Fitzgerald emails to say. After Hunt dropped a massive hint to Bloomberg, officials now tell James the “Great British ISA” — shelved before the Autumn Statement — is firmly back on the table.