Kate Andrews Kate Andrews

Liz Truss’s mea culpa moment

The Prime Minister has realised that her battle with the OBR was a fight too far

(Getty)

The fallout from last Friday’s mini-Budget has been bigger and more volatile than almost anyone expected, with sterling hitting an all-time low against the dollar; runaway gilt yields; a U-turn from the Bank of England on its plans to start quantitative tightening. And that was all by Wednesday lunchtime.

Will things be looking up anytime soon? The pound has recovered to pre-mini-Budget levels, hovering around $1.11, a point the Prime Minister’s supporters are keen to emphasise. But the pound has always been a secondary part of this story: with soaring borrowing costs the primary indication of the market’s confidence (or lack thereof) in the government’s tax cut-and-spend strategy.

The real good news ending this tumultuous week (or, rather, better news than what’s been flooding in so far) is that the Office for National Statistics has just released revised GDP figures, and the new numbers suggest that the UK is not, as feared, already in recession.

GDP for Q2 of this year has been updated from a 0.1 per cent contraction to a 0.2 per cent rise. Furthermore, projections for Q3 are forecast to be a 0.1 per cent rise. As the technical definition of a recession is two consecutive quarters of negative growth, this would suggest the UK is months away from falling into recession – and still in a position to avoid it altogether.

But the good news stops there. The revised figures also reveal that the UK economy has not recovered to its pre-pandemic levels, estimated to be 0.2 per cent below February 2020 levels. It is the only advanced economy to have failed to fully bounce bank, putting even more strain on the government to meet its own 2.5 per cent growth target. The government’s decision last year to keep Britain in one of the longest lockdowns in Europe (despite the successful vaccine rollout) is constantly being highlighted in the numbers – from NHS waiting lists to education setbacks – and in the GDP figures, too.

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