Experts have slammed the Bank of England for being “out of touch” as the revised GDP figures show that the UK economy is in serious danger of heading into a recession.
Gross domestic product (GDP) fell by a revised 0.1 percent against the zero growth initially estimated, the Office for National Statistics (ONS) said.
It also flatlined during the second quarter of the year, after prior estimates showed 0.2 percent growth, painting a bleaker picture for the economy.
There have been concerns over the UK’s weak economic growth for some time, but the country has managed to avoid a recession so far.
However, Ashley Webb, UK economist at Capital Economics, said that the revised figures “may mean that the mildest of mild recessions started” in the third quarter between July and September.
The new figures suggested that rising interest rates are weighing on consumer spending, which slowed over the period.
Retailers said earlier Black Friday sales and wider discounting contributed to the increase in non-food store sales volumes of 2.3 percent in November 2023. However, sales volumes fell by 0.8 percent in the three months to November 2023 when compared with the previous three months.
Experts gave their view on whether this could see the Bank of England cut interest rates earlier than anticipated in 2024.
Riz Malik, founder and director at R3 Mortgages explained that the Monetary Policy Committee should undertake some “serious reflection” over the festive period, especially those members who wanted to increase rates at their last meeting.
The Bank of England was criticised for being too slow with interest rate increases, but being too slow with rate cuts can be equally harmful, especially with an economy that is in serious trouble as today’s GDP clearly shows.
He said: “Those in charge of managing the economy should feel embarrassed. The GDP data shows how out of touch they are.”
Craig Fish, director at Lodestone Mortgages & Protection also shared similar views as he believes the Bank should be “hanging their heads in shame” over poor decisions to raise the interest rates.
Mr Fish stated: “The last thing needed is an increase, and these numbers could result in a cut coming sooner rather than later, that is if the MPC doesn’t repeat its mistakes.
“They were too slow to increase rates to tackle inflation, so let’s hope they aren’t too late to decrease rates when fighting off a recession.”
The Bank of England previously warned that interest rates will remain at their 15-year highs for some time to come in order to bring inflation sustainably back to the two percent target.
Sarah Breeden, in her maiden speech as deputy governor of the BoE, said: “It will be important for monetary policy to be restrictive for an extended period in order to return inflation sustainably to the two percent target in the medium term.”
The Bank of England has held interest rates at 5.25 percent for the third time in a row and indicated cuts are unlikely in the coming months.
