Rishi Sunak suffered a blow as revised figures showed the UK economy performing worse than previously thought, shrinking between July and September.
The prime minister made growing the economy one of his five key pledges to voters at the start of the year.
In fresh setback to the Tory leader’s target, the official statistics watchdog downgraded its estimates of Britain’s economic performance this year.
The Office for National Statistics (ONS) said gross domestic product (GDP) fell by 0.1 per cent in the three months to September, down from an earlier estimate that it had flatlined.
And it said from April to June Britain experienced no GDP growth at all, compared with an earlier estimate of a 0.2 per cent rise.
Labour lashed out at Mr Sunak’s “legacy of failure” and promised Sir Keir Starmer would revive Britain’s fortunes.
Shadow chancellor Rachel Reeves said: “Rishi Sunak failed to beat Liz Truss, he failed to cut waiting lists, he failed to stop the boats and now he has failed to grow the economy.
Rachel Reeves said Rishi Sunak’s legacy is ‘one of failure’— (PA Wire)
She added: “Thirteen years of economic failure under the Conservatives have left working people worse off, with higher bills, higher mortgages and higher prices in the shops.”
But Jeremy Hunt said the outlook for Britain’s economy “is far more optimistic than these numbers suggest”. The chancellor pointed to a further fall in inflation this week and said tax cuts announced in his autumn statement would boost economic growth.
Mr Sunak said “of course we want to see more growth” – but said the UK economy has “done better” than predicted at start of 2023, and insisted that Britain has grown faster than some other European countries.
The PM also hailed national insurance tax cuts on the way in January. “Because we’ve done a good job having inflation, we’re able to now cut taxes for families, and that tax cut is significant,” he told reporters. “That will help put more money in the pockets of families up and down the country.”
Chancellor Jeremy Hunt insisted the outlook for Britain is ‘far more optimistic than these numbers suggest’— (Getty Images)
Mr Hunt has said 2024 should be the year when “we need to throw off our pessimism and declinism” – as he suggested better than expected inflation figures meant the Bank of England should be able to cut interest rates early next year.
The chancellor told the Financial Times: “There’s a reasonable chance that if we stick to the course we’re on, we’re able to bring down inflation, the Bank of England might decide they can start to reduce interest rates.”
The Trades Union Congress (TUC) said the growth figures were “dismal” and Britain is now stuck in a “doom loop” and “teetering on the brink of recession”.
The uinion leader Paul Nowak said: “We can’t go on like this. Our economy is stuck in a doom loop and working people are paying the price as unemployment rises and living standards fall.”
The latest fall in GDP was driven by a drop-off in the services sector, the ONS said, which includes things like retail and hospitality.
The latest figures mean that, aside from overseeing a halving in the rate of inflation, the PM ends the year having failed on all of his other pledges; stopping small boat channel crossings, reducing national debt, cutting NHS waiting lists and growing the economy.
Earlier this week Mr Sunak tried to row back on his pledge to “stop the boats”, insisting there is no “firm date” on the promise.
Grilled by parliament’s powerful liaison committee, Mr Sunak said he does not have “a precise date” for when the crossings will stop. “We will keep going until we do [stop the boats],” he insisted.
