Will the UK economy bounce back in 2024?

Fears the UK is heading for a recession are growing as the economy unexpectedly shrank slightly in the third quarter, with gross domestic product falling by 0.1%.

The "tepid numbers" from the Office for National Statistics (ONS) for the three months to September represent a "downward revision" from the earlier estimate of a 0.2% increase, and highlight the economy's struggle to "shake off low-growth performance", said the Financial Times.

The figures mean the UK is "at risk of recession", said the BBC. So how might the nation's economy perform in 2024?

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What did the papers say?

The UK's economy is "stuck in a lacklustre state" as it wrestles with "high borrowing costs and the legacy of the worst inflationary upsurge for a generation", said the FT.

Projections released by the Bank of England in November suggested there is "little immediate prospect of a bounceback", as the central bank forecasts "near-zero growth through next year, even as the worst of the inflation subsides".

But speaking to the paper, Chancellor Jeremy Hunt insisted that 2024 was "when we need to throw off our pessimism and declinism about the UK economy".

Hunt has "sought to give Tory MPs an early Christmas present" with "another hint he could cut taxes ahead of a general election next year", said The Independent. The chancellor said the government would "cut the tax burden if we are able to".

He also raised the prospect of the Bank of England reducing interest rates in 2024, which is "when people will begin to have more confidence about their own personal prospects and the prospects of their family".

However, the FT said that his talk of rate cuts will "jar" with the Bank of England, which "jealously guards its independence and has been insisting it is too soon to discuss easing policy".

If employment "stays solid" then the economy "should do OK", John Stepek wrote for Bloomberg, but if unemployment "really surges (as opposed to rising a bit), then all bets are off".

Stepek also forecast that 2024 would be "sluggish for the housing market". Although Hunt "probably doesn't have much room for fireworks at his next budget", he added, it's "hard to see him resisting some sort of freebie" in the form of a tax cut.

But there could be big problems from further afield. Philip Pilkington warns in The Telegraph that the West is "sleepwalking into an economic catastrophe in the Red Sea". The Houthi rebels "could well manage to enact a de facto blockade of the Suez Canal by preventing commercial maritime vessels entry to the Red Sea", he wrote, and "the economic effects of this could be nothing short of profound".

If the Red Sea "remains a no-go zone for some time", it "looks like the Western world is going to have to brace for another wave of inflation", and "frankly, it is not clear that our economies, beaten and bruised from the last wave, can take it".

What next?

The latest ONS figures "show how close the UK could have come to a formal recession, which is marked by two consecutive quarters of negative growth", said The Times, but it will "not be clear until February" whether the UK has entered or avoided recession when figures are released for the October to December quarter.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, told The Times he expected growth to hold steady in the final three months of the year, "before then rising at an average quarter-on-quarter rate of 0.3% during 2024".

However, one of the world's biggest active bond fund managers has "dampened the festive mood" by warning of a serious economic downturn next year, said The Guardian.

Daniel Ivascyn, chief investment officer at Pimco, compared the UK economy with the US, and said that "in the case of the UK – a smaller, open economy, with a consumer that's feeling the brunt of central bank policy far more than their US counterparts – you just have a higher probability of more significant economic deterioration".

He added that "there's potentially more hard landing risks", a term that refers to a marked economic slowdown or downturn following a period of rapid growth.