Growth surprises slightly to the upside in Q2 but over the past 18 months has been the weakest for 65 years outside of a recession

The UK economy grew slightly in Q2, exceeding expectations for flat growth. But the cost of living crisis period remains the weakest outside of a recession for 65 years, the Resolution Foundation said today (Friday) in response to the latest ONS GDP data.

GDP increased by 0.2 per cent in Q2 2023, following a small rise in Q1, with growth in household and government consumption partially offset by a drag from trade. The all-important services sector continued to expand and there were also positive contributions from the manufacturing and production sectors.

But looking back over the cost of living crisis, the UK economy has grown by just 0.4 per cent since the start of 2022. This is the weakest 18 months of growth since the 1950s, lower than other G7 countries except Germany which went into recession earlier this year. During that period the UK has had the highest average inflation among the G7 (9.1 per cent).

So while it’s good news that the UK economy grew slightly in Q2, and has avoided the recession experienced elsewhere, the reality is that the economy continues to stall, with high inflation and rapid increases in interest rates meaning that this period will feel like a recession in all but name to many.

James Smith, Research Director at the Resolution Foundation, said:

“The good news is that the economy grew by 0.2 per cent in Q2, stronger than the flat growth many had expected. This is a continuation of the UK’s relative resilience as we continue to dodge the technical recession experienced elsewhere in the face of the ongoing cost of living crisis.

“But the big picture is that the UK economy has expanded by just 0.7 per cent since the start of 2022 – the weakest growth in 65 years outside of a full-blown recession.

“With the economy continuing to stall, we are far from out of the cost of living crisis woods yet. Such weak growth will feel like a recession to many as families struggle with the ever-rising cost of essentials and higher mortgage repayments.”