Britain's is the only major economy set to contract this year, three years on from Brexit

The Government yesterday defended its economic record and said woeful predictions from the IMF are overly pessimistic, on the third anniversary of the UK leaving the EU.
By The Newsroom
Published 1st Feb 2023, 06:00 BST

A pandemic and a war on European soil make assessing the true impact of Brexit challenging, but the IMF warning that Britain would see lower growth than even Russia this year is set against a backdrop of declining sales and purchases with the continent.

Labour said the prediction is a damning indictment of 13 years of economic mismanagement under the Tories.

But government minister Richard Holden said the IMF had been wrong before, and that he expects the economy to outperform the forecast of shrinking by 0.6 per cent this year.

Britain's economy will slam into reverse this year as the cost-of-living crisis hits households hard and will see the worst performance of all the advanced nations, the International Monetary Fund (IMF) has warned. Chancellor Jeremy Hunt last week talked up the UK economy and its growth prospects in his first major speech in the post, declaring that "declinism about Britain was wrong in the past and it is wrong today".Britain's economy will slam into reverse this year as the cost-of-living crisis hits households hard and will see the worst performance of all the advanced nations, the International Monetary Fund (IMF) has warned. Chancellor Jeremy Hunt last week talked up the UK economy and its growth prospects in his first major speech in the post, declaring that "declinism about Britain was wrong in the past and it is wrong today".
Britain's economy will slam into reverse this year as the cost-of-living crisis hits households hard and will see the worst performance of all the advanced nations, the International Monetary Fund (IMF) has warned. Chancellor Jeremy Hunt last week talked up the UK economy and its growth prospects in his first major speech in the post, declaring that "declinism about Britain was wrong in the past and it is wrong today".

Labour’s Shadow chancellor Rachel Reeves said criticism that some of the IMF’s past forecasts had proved to be incorrect did not take away from the “facts” about the UK economy’s performance under successive Conservative administrations.

The shadow chancellor, asked whether the IMF forecast could be trusted, said: “If we don’t want to look at the predictions, let’s look at the facts of what has happened in terms of UK growth.

“The average growth in the UK economy has been just two-thirds under the Conservatives than it was under the last Labour government. And the UK is now the only major economy to be smaller today than it was before the Covid pandemic hit.

“That isn’t a prediction about what is to come, that is the state of the UK economy after 13 years of Conservative governments.”

Ms Reeves said Labour would look to “seize some of the opportunities” in the green sector as well as “fixing some of the holes in the patchwork Brexit deal”, if it was in power in a bid to get “our economy firing on all cylinders”.

Chancellor Jeremy Hunt stressed many forecasts were overly-pessimistic about the UK economy last year.

“Short-term challenges should not obscure our long-term prospects, the UK outperformed many forecasts last year, and if we stick to our plan to halve inflation, the UK is still predicted to grow faster than Germany and Japan over the coming years,” he said.

The IMF said Britain’s predicted GDP fall reflects “tighter fiscal and monetary policies and financial conditions and still-high energy retail prices weighing on household budgets”.

It follows efforts by Mr Hunt last week to talk up the UK economy and its growth prospects in his first major speech in the post, declaring that “declinism about Britain was wrong in the past and it is wrong today”.

Chief economist for the IMF, Pierre-Olivier Gourinchas, explained there were three key factors driving the UK’s economic outlook.

He said: “First, there is exposure to natural gas… we’ve had a very sharp increase in energy prices in the UK.

“There is a larger share of energy that is coming from natural gas, with a higher pass-through to final consumers.

“The UK’s employment levels have also not recovered to pre-pandemic levels.

“This is a situation where you have a very, very tight labour market but you have an economy that has not re-absorbed into employment as many people as it had before.

“That means there is less output, less production.

“The third is that there is a very sharp monetary tightening because inflation has been very elevated, that’s a side effect of this high pass-through of energy prices.”