The British economy contracted more than initially estimated

The British economy contracted more in the third quarter than initially assumed. Photo: Phil Noble/Reuters

The UK economy contracted slightly more than initially estimated in the third quarter of this year, with GDP falling 0.3% between July and September, according to the ONS.

In initial figures released last month, the ONS estimated that third-quarter GDP had contracted by 0.2%, but the revised figures show the UK economy was hit harder than expected as business investment fared poorly.

Two consecutive contractions would mean the economy is in recession.

The ONS said the economy also grew less than initially estimated in the first half of the year, with revisions showing the UK posted growth of 0.6% in the first quarter and 0.1% in the second quarter.

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The ONS previously said growth was 0.7% and 0.2% in those quarters, respectively.

In the third quarter of the year, production across the manufacturing sector fell 2.3% ⁠ – including declines in all 13 manufacturing subsectors.

Real household spending fell by a revised 1.1% between July and September, driven by declines in net tourism, transport, household goods and services, and food and drink.

ONS Director of Economic Statistics Darren Morgan said: “Our revised numbers show that the economy performed slightly less well last year than we had previously estimated, with manufacturing and power generation notably weaker.

“Household incomes continued to fall in real terms, albeit more slowly than in the previous two quarters, while ⁠ – adjusting for inflation ⁠ – household spending fell for the first time since the final COVID-19 lockdown in spring 2021.”

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Business investment fell 2.5% on a quarterly basis, compared to a previous initial estimate of a 0.5% decline.

The figures place the UK at the bottom of the Group of Seven (G7) in terms of quarterly economic growth.

The story goes on

Economists predict the UK will contract in the fourth quarter of 2022, which would be a technical recession, and will struggle in 2023 as well.

Consider: What is a recession and how do we recognize it?