UK Falls Into Recession, And A Far Deeper Living Standards Downturn

16th February 2024

The UK economy fell into recession in the second half of 2023, but families have experienced a far deeper living standards downturn, with GDP per capita now 4.2 per cent off its pre-cost of living crisis path - equivalent to a loss of nearly £1,500 per household – the Resolution Foundation said today.

Weaker than expected growth meant that the economy contracted by 0.5 per cent in the second half of 2023, while the economy grew by 0.1 per cent over the whole of 2023.

While this is likely to be a be a relatively shallow recession, the data is flattered by a growing population, says the Foundation.

Looking instead at GDP per capita – which is what matters most for household incomes – the Foundation notes that it has fallen by 0.7 per cent across 2023, and hasn't grown since Q1 2022, the longest runs of falls or stagnation since 1955.

GDP per capita was 4.2 per cent off its pre-cost-of-living-crisis path by the end of 2023, a loss equivalent to nearly £1,500 per person in annual GDP terms.

The Foundation adds that the bigger picture is that Britain remains a stagnation nation, with GDP growth over the past 15 years (1.2 per cent), more than halving compared to the previous 15 years (2.8 per cent).

James Smith, Research Director at the Resolution Foundation, said, "Britain has fallen into recession, and a far deeper living standards downturn. Even this weak data is flattered by a rising population. After accounting for population growth, the UK economy hasn’t grown since early 2022, and fallen far behind its pre-cost of living crisis path, with an equivalent loss of around £1,500 per person.

"The big picture is that Britain remains a stagnation nation, and that there are precious few signs of a recovery that will get the economy out of it."