The economy saw zero growth between October-December and a 0.5% fall in economic output during December, partly due to strike action, according to the Office of National Statistics (ONS).
ONS reported the economic output between October and December was a flat 0%. A negative figure would have meant the UK is in recession as the economy contracted over the previous three months from July-September.
The Bank of England still expects the UK to enter a recession later this year, but expects it to be shorter and less severe than first thought. Chancellor Jeremy Hunt says the figures show the economy is “more resilient than many feared.”
In a tweet, the Chancellor said: “The fact the UK was the fastest growing economy in the G7 last year - as well as avoiding recession - shows our economy is more resilient than many feared. We are not out of the woods yet . It’s a tough time for many. We need to stick to our plan to halve inflation this year.”
William Marsters, Senior Sales Trader at investment platform Saxo, said: “The UK has avoided a recession by the narrowest of margins and this morning’s Bank of England’s announcement will come as a short-term relief to many businesses, investors and consumers.
"That said, though the quarterly change in GDP was 0%, December’s monthly GDP fell 0.5%, which was higher than expected, suggesting the prospect of falling into a recession is more a matter of when rather than if in 2023. This is the second month in a row that the UK has avoided falling into a recession, however, it may not be third time lucky in March.
“After rising to £1.219 against the dollar yesterday, the pound has since retreated today to £1.209, but little reaction from before the GDP print. Despite no confirmation today, millions of people and hundreds of businesses will still feel the economic pressures and tightened financial conditions that come with soaring inflation, increased interest rates and a higher cost of living."
What is a recession?
A recession is defined as an economy shrinking for two consecutive three month periods. The last time the UK went into recession was in 2020 during the Covid-19 pandemic.