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UK economy shrank more than thought in third quarter

Gross domestic product fell by a revised 0.3% in the third quarter of 2022

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Revised figures from the Office for National Statistics on Thursday painted a grim picture for the UK economy, which was shown to have contracted by more than was initially estimated between July and September.

Gross domestic product fell by a revised 0.3 per cent in the third quarter of 2022, against the estimated 0.2 per cent decline, as business investment performed worse than anticipated. Growth figures for the first half of 2022 were also revised down, with figures showing the UK mustered growth of just 0.6 per cent in the first quarter and 0.1 per cent in the second quarter.

The ONS additionally reported that GDP is now estimated to be 0.8 per cent below pre-pandemic levels, revised down from a prior estimate of 0.4 per cent below.

“Our revised figures show the economy performed slightly less well over the last year than we previously estimated, with manufacturing and electricity generation notably weaker,” said Darren Morgan, director of economic statistics at the ONS.

The coming months look far from bright, as experts predict the economy will shrink further in the final quarter of 2022, which would see the UK fall into recession — when an economy shrinks for two quarters in a row — with forecasts that it will experience contractions of a similar size in both the first and second quarters of 2023. The effects are already hitting consumers hard, with household spending dropping by 1.1 per cent after inflation over the third quarter — the first fall since January to March of 2021, when the UK was in lockdown.

“Household incomes continued to fall in real terms, albeit at a slower rate than in the previous two quarters,” Morgan said.

Compared with other advanced economies, the UK is faring especially poorly.

“The national accounts confirm that the UK was the only G-7 economy in which third-quarter GDP still was below its pre-Covid level,” said Samuel Tombs of Pantheon Macroeconomics.

“Looking ahead, the UK likely will continue to underperform; we expect Britain to suffer the deepest recession among major advanced economies in 2023.”

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