UK economy shrinks more than expected as revised GDP captures greater fall of 0.3%

The UK economy contracted by more than first thought in the third quarter, official statisticians have announced.

Growth has also been weaker than estimated throughout much of the past year in a grim set of official figures that suggest Britain is heading for recession.

Gross domestic product (GDP) fell by a revised 0.3% against the 0.2% decline initially estimated, the Office for National Statistics (ONS) said.

The ONS has also said the economy grew less than first estimated throughout the first half of the year, with revisions showing the UK eked out growth of 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.

In 2021, GDP growth is now shown to be weaker in the third and fourth quarters.

The statistics come as the UK struggles to get a grip on the ongoing cost of living crisis that has seen energy prices and inflation skyrocket.

In a bid to tame climbing inflation, the Bank of England has hiked interest rates.

The raising of interest rates has taken money out of the pockets of millions of borrowers, intensifying the already painful squeeze on living standards.

Last week, the BOE implemented a 0.5% increase which added £49 to the monthly repayment of the average tracker mortgage - a mortgage which has already seen monthly repayments rise by £284 during the course of 2022.

Months of financial uncertainty have been sparked in part by Liz Truss' mini-budget. Consumer spending habits have also shrunk, which has also affected overall GDP.

And despite retailers cutting prices of products to encourage Christmas spending over the Black Friday sales period, non-food store sales volumes fell by 0.6% in November.

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 and electricity generation notably weaker.

“Household incomes continued to fall in real terms, albeit at a slower rate than in the previous two quarters, while – taking account of inflation – household spending fell for the first time since the final Covid-19 lockdown in the spring of 2021.”

Shadow chancellor Rachel Reeves has accused the Government of losing control over the economy after the ONS found the UK economy contracted by more than first thought in the third quarter.

The Labour MP tweeted: “GDP data has been revised down, leaving the UK with the worst growth in the G7 in the last quarter.

“The Tories have lost control of the economy and are leaving millions of working people paying the price.

“Only Labour has a proper plan to get our economy growing.”

ONS data also out on Thursday showed Britain’s underlying current-account deficit – the difference between the value of the goods and services the UK imports and the goods and services it exports – narrowed to £32.5 billion in the third quarter, down by £900 million on the previous three months.

Want a quick and expert briefing on the biggest news stories? Listen to our latest podcasts to find out What You Need To Know.