The UK just entered into a recession. Or did they?  And how does this affect us here in the Caribbean?

The United Kingdom has officially slipped into a recession after GDP fell 0.3% in the last three months of 2023. 

That’s according to the Office for National Statistics. The office also reported a 0.1% decline between July and September 2023.

A recession is typically defined as two consecutive quarters of economic decline.

According to the ONS, all the nation’s main sectors fell in the last quarter. Manufacturing, construction and wholesale had the most significant impacts.

The recession news comes just a couple of months before the UK’s general election, so it’s not a good look for Prime Minister Rishi Sunak.

This is Sunak’s first time leading his party in a general election. He became Prime Minister back in 2022 during that crazy stretch when the UK went through three Prime Ministers in four months.  His immediate predecessor, Liz Truss, resigned after just six weeks!

One of the major issues that forced those resignations was the economy. So now with the country being in a recession, it can’t be a good feeling. 

But on the other hand, you have some economists saying, the label ‘recession’ is too harsh and ‘overly dramatic’, given that the declines were so small – o.1% and 0.3%.

Plus they’re arguing that despite the dip, employment rates continue to rise, and real wages – the amount of money a person makes, adjusted for inflation – have rebounded. 

Speaking of inflation, Britain’s annual inflation rate stayed at 4% in January, which is still higher than the Central Bank’s 2% target, but much better than the 11% high in October 2022.

So essentially they’re saying economic growth is down, but there’s still a lot of good happening. It’s the same argument the US made in 2022 after they had two consecutive quarters of negative growth as well.

In any case, the ONS said 2023 was the UK’s worst economic performance since 2009 when the economy was still reeling from the global financial crisis. 

So how does this affect us in the Caribbean?

Well it could affect us on two fronts – tourism and remittances.

The UK is a major source of tourists to the Caribbean, but if their economy is down, Brits may have less money to travel and spend here.

Meanwhile, remittances from Caribbean people living in the UK is also a big source of revenue for our countries.  But if your family living in the UK is having a tougher time, they might not be able to send as much money back home.

And that’s the bottom line.