[CROYDON, 19/07/2023] - Recently-released figures show that Britain's economy slowed in 2023 due to inflation reducing disposable income. The economy only grew by 0.1 percent in the first quarter, the same as the previous estimate from the Office for National Statistics. The output in 2023's first quarter was 0.5 percent less than in the last quarter 2019. Economists believe that there is a risk of recession in the future due to higher interest rates, despite inflation starting to decrease.

Effect on Households

The overall saving ratio remained higher than before the pandemic; households had to dip into their savings due to the cost of living increasing faster than income. Unfortunately, the squeeze on households seems to be ongoing as the Bank of England raised interest rates to a 15-year high of 5 percent in June, and investors do not see any indication that it will end its tightening cycle anytime soon.

Escaped Recession

The latest Q1 2023 GDP data shows that the economy did not enter a recession at the beginning of 2023. However, since the negative impact of higher interest rates has only affected 40 percent of the economy, experts predict that a recession will still occur in the second half of this year.

Every other big advanced economy has recovered from the pandemic faster than Britain, except for Germany, whose economy in the first quarter was also 0.5 percent smaller than before the pandemic.

Sluggish Growth

At the end of the first quarter, Britain's economy grew only 0.2 percent annually. Despite positive trends in jobs, wages, and consumer confidence, some economists believe that the GDP data suggests more sluggish growth is likely rather than a full-blown recession. HSBC economist Liz Martins predicts slow and limited increases in unemployment.

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