Britain narrowly avoids recession, but faces headwinds in coming year

Feb. 10 (UPI) -- Britain's economy flatlined in the fourth quarter, with the gross domestic product showing no change, the government's main statistical agency said Thursday.

The performance means the world's fifth-largest economy neither grew nor shrank and recession was avoided, albeit by the slimmest of margins after the economy saw a 0.2% decline in GDP the third quarter. A recession is defined as two consecutive quarters of negative growth.

GDP went into reverse in December, falling 0.5%, after growing 0.1% in November. The Bank of England and the International Monetary Fund both forecast that Britain will go into recession this year. The IMF's GDP forecast is -0.6% while the BoE sees the economy shrinking by 0.7%.

Growth for the whole of 2022 was 4%, although that is attributed to a strong rebound from the economic lows plumbed during the COVID-19 emergency, when much of the economy was shut down. The economy remains smaller than it was before the pandemic.

Chancellor Jeremy Hunt, who was appointed specifically to pull the economy out of a nosedive triggered by a plan for unfunded tax cuts introduced by former Prime Minister Liz Truss in September, told the BBC the figures showed "underlying resilience" but said, "we are not out of the woods."

He acknowledged that high inflation remains a problem and continues to cause "pain for families up and down the country."

The news provoked a strong response from opposition politicians.

"Today's figures show us how -- despite Britain's great potential -- our economy is stuck in the slow lane," said Labour's Shadow Chancellor Rachel Reeves.

"We can be a leader in the industries of the future that will help grow our economy. And we must bring in urgent measures to prevent yet more harm from the cost of living crisis, using a proper windfall tax on oil and gas giants to stop the energy price cap going up in April so that people have more money in their pockets," she added.

"Built on the rock of economic stability, Labour will tackle the cost of living crisis and get our economy growing, with our Green Prosperity Plan, reform to business rates, and by making the U.K. the best place to start and grow a business."