Revised statistics released by Office for National Statistics on Friday reveal a surprise downturn in the UK's economy during the third quarter.
Defying initial estimates, the economy showed a 0.1 percent decline in GDP compared to the previous quarter, compared to the earlier projection of a 0.2 percent rise.
The latest economic indicators point towards a looming recession in the UK, increasing the probability that the Bank of England will opt for interest rate cuts as soon as the spring season.
With the economy shrinking in the third quarter, the UK now faces the potential of a technical recession — defined as two consecutive quarters of falling GDP.
In October, there was a decrease in economic output by 0.3 percent compared to the previous month. A recovery was necessary in November and December for the economy to avoid a contraction in the fourth quarter.
As a response to the recent data, there is now a near-total anticipation among investors of six quarter-point cuts from the Bank of England, with the first predicted in May.
The current economic slump presents hurdles for Prime Minister Rishi Sunak as he approaches next year's election, notably since his Conservative Party lags around 20 points behind the Labour Party in polls. Previously, Sunak had committed to economic growth and urged voters to judge his performance.
According to predictions from both private-sector analysts and the Bank of England, the UK's GDP is expected to show no increase this quarter, reflecting a year of economic underperformance. This lack of growth is mainly due to a 0.2 percent reduction in the services sector, which accounts for 80 percent of the UK's economic output.
The economic situation in the UK reflects broader patterns seen throughout Europe, with major economies such as Germany, France and Italy also grappling with comparable recessionary forces.
Sanctions levied against Russia are at the core of this global economic downturn, causing disruptions in energy supply and affecting worldwide supply chains. The situation has increased economic uncertainties and presented challenges across Europe, emphasizing the interconnected nature of global economies.