UK economy shrank unexpectedly by 0.3 per cent in August, official figures show

12 October 2022, 07:12 | Updated: 12 October 2022, 08:05

The UK economy unexpectedly shrank in August
The UK economy unexpectedly shrank in August. Picture: Alamy

By Daisy Stephens

The UK economy unexpectedly shrank by 0.3 per cent in August, official figures from the Office of National Statistics have shown.

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Experts had been expecting economic growth to flatline in August.

The figure is down from downwardly revised growth of 0.1 per cent the previous month, according to the ONS.

The latest data means the economy is on track to contract overall in the third quarter, with the ONS confirming there would need to be growth of more than 1 per cent in September to prevent a quarterly decline.

It comes amid fears the UK is heading for a recession as the cost-of-living crisis takes its toll on households and businesses.

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The ONS said there has been a continued slowing in three-month on three-month growth, with gross domestic product (GDP) falling by 0.3 per cent in the quarter to August.

On a monthly basis, the economy is now back to where it was before the pandemic struck, having been higher than pre-Covid levels earlier in the summer.

Grant Fitzner, chief economist of the ONS, said: "The economy shrank in August with both production and services falling back, and with a small downward revision to July's growth the economy contracted in the last three months as a whole.

"Oil and gas production fell as more scheduled North Sea summer maintenance took place than usual.

"Notable decreases were also seen across much of manufacturing.

"Health also contributed to the decline, with a drop in the number of hospital consultations and operations."

He added: "Sports events too had a slower month after a strong July and many other consumer-facing services struggled with retail, hairdressers and hotels all faring relatively poorly.

"On the positive side, these falls were partially offset by stronger than usual summer performance from many professional services such as lawyers, accountants and architects."

'This is the most pro market we've had for some time!'

Business secretary Jacob Rees-Mogg said the figures showed the "need for a package for growth" as well as suggesting the data could be revised.

"These figures, bear in mind, are very often revised," he told LBC's Nick Ferrari at Breakfast.

"So a couple of days ago the ONS produced revised figures for an earlier quarter where they said that there had been growth previously they said there had been contraction."

He also said the figure covers a month before the current government took over - although Nick pointed out that he was in government then.

Mr Rees-Mogg said "monetary policy has to tighten" to tackle inflation.

'The current government is on the brink and it could fall at any time.

Chancellor Kwasi Kwarteng said the Government had "acted quickly" to tackle challenges facing "countries around the world".

He insisted the Government's energy support package and growth plan will "address the challenges that we face".

But the financial market turmoil sparked by his mini-budget has sent mortgage rates soaring, heaping yet more pressure on cash-strapped Britons.

The International Monetary Fund (IMF) warned on Tuesday that the UK economy could sharply reduce in 2023 as consumer spending catches up with rampant inflation and higher interest rates.

It downgraded its forecast for UK GDP growth next year to just 0.3 per cent in 2023 from 0.5 per cent previously pencilled in.

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"Countries around the world are facing challenges right now, particularly as a result of high energy prices driven by Putin's barbaric action in Ukraine," Mr Kwarteng said.

"That is why this Government acted quickly to put in place a comprehensive plan to protect families and businesses from soaring energy bills this winter.

"Our growth plan will address the challenges that we face with ambitious supply-side reforms and tax cuts, which will grow our economy, create more well-paid skilled jobs and, in turn, raise living standards for everyone."

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