The UK economy is in a “precarious position” despite returning to growth in November, the financial services sector has warned.
The latest figures, published this morning (12 January), show GDP rose by 0.3% last month, following a surprise 0.3% contraction in October.
And while this news has been welcomed, experts have said the chance of the country entering a recession is still very much on the cards.
Quilter Cheviot head of fixed interest research, Richard Carter, said: “This uplift in November is just enough to bring the UK economy back to flat growth over these two months, but it leaves an awful lot of pressure on the December figures as even a slight downward turn would result in the UK entering a technical recession after Q3 GDP was revised down to a fall of 0.1% at the end of last year.
“This morning’s figure shows just how precarious the situation is for the UK economy and piles yet more pressure onto the Bank of England to cut interest rates.
“The bank has managed not to tip the UK into a recession to date, but it is looking increasingly likely that its luck may be coming to an end.
“Growth, though positive in November, is still relatively weak and interest rates are clearly biting.
“While you might argue the recent drop in inflation leaves the Bank with a considerably less daunting task in terms of steering inflation back to its 2% target this year, there are global headwinds and we saw inflation notch up in the US.
He added: “Economic conditions are incredibly tough, and the UK faces a real challenge when it comes to avoiding recession as we move further into the winter months.
“The UK is currently on the cusp, and continued weak growth or even contraction cannot be ruled out.”
James McManus, chief investment officer at digital wealth manager Nutmeg, said: “Today’s GDP reinforces the position that we have held for some time: economic growth will be limited in the UK, and other developed markets, for some time, as economies continue to see the impact of above target inflation, higher interest rates and lower levels of consumer spending playing out in their data.
“While concerns and speculation over the UK’s weak economic growth and potential to slip into recession have been circulating since the start of 2023, thus far the economy has avoided tipping into a technical recession.”
However, he said that revised GDP figures released at the end of December showed that the UK economy shrank by 0.1% between July and September last year, “increasing the risk that recession may be on the horizon”.
“So today’s positive GDP figure shows green shoots that the final quarter of the year may deliver some much-needed growth,” he added.
