UK: Economy shrank more than previously thought

The UK economy shrank by more than first thought in the three months to September, revised figures show.

The economy contracted by 0.3%, compared with a previous estimate of 0.2%, as business investment performed worse than first thought, the Office for National Statistics (ONS) said.

Growth figures for the first half of 2022 have also been revised down.

The UK is forecast to fall into recession in the final three months of the year as soaring prices hit growth.

A country is considered to be in recession when its economy shrinks for two three-month periods – or quarters – in a row. Typically companies make less money, pay falls and unemployment rises, leaving the government with less money in tax to use on public services.

Darren Morgan, director of economic statistics at the ONS, said: “Our revised figures show the economy performed slightly less well over the last year than we previously estimated”, with manufacturing “notably weaker”.

He added that household incomes, when accounting for rising prices, continued to fall, and household spending “fell for the first time since the final Covid-19 lockdown in the spring of 2021”.

The economy has been hit as surging energy and food prices push inflation – the rate at which prices rise – to its highest level in 40 years.

It means that consumers are spending less and businesses are cutting investment.

Along with its revision for the July-to-September period, the ONS said the economy also grew less than first estimated in the first half of the year – expanding by 0.6% in the first quarter and 0.1% in the second quarter.

The ONS has previously said growth stood at 0.7% and 0.2% in those quarters respectively.

It is not unusual for the ONS to revise its growth estimates. It produces a first estimate of GDP about 40 days after the quarter in question, at which point only about 60% of the data is available, so the figure is revised later as more information comes in.