It's the economy, Sunak: has 'Rishession' halted Tory fightback?

Voters discovered the UK had entered a technical recession just hours before the Conservatives lost two by-elections, in what pundits described as a "perfect storm of shittery" for Rishi Sunak.

The Office for National Statistics announced yesterday that the UK's gross domestic product (GDP) fell by 0.3% in the three months to December, marking a second consecutive quarter of falling national output – "the technical definition of a recession", said The Guardian. 

The prime minister promised last year to grow the economy, but growth over the whole of 2023 was estimated at 0.1%. That makes it the weakest year since the financial crisis of 2009, excluding 2020 and the outbreak of the Covid-19 pandemic. The Conservatives promises are "in tatters", said shadow chancellor Rachel Reeves. "This is Rishi Sunak's recession," she told a press conference on Thursday, adding that the growth data shows that "something has gone profoundly wrong".

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Hours later, Labour overturned a substantial Conservative majority to win the by-election in Kingswood, and secured a 28.5% swing to take Wellingborough, a safe Tory seat since 2010. "Losing both those seats a day after a recession is announced would just be a perfect storm of shittery for the Conservatives," Joe Twyman, director of public opinion firm Deltapoll, had told the i news site.

What did the commentators say?

Britain's recession was variously described by economists as "technical" and "shallow". But "in the brutal political arena ahead of a general election it was given a different name: 'Rishi's recession'," said the Financial Times. 

According to the Resolution Foundation think tank, GDP per head is 4.2% lower than before the cost-of-living crisis. This is the metric that "ultimately boosts living standards", said the FT, and the drop equates to a loss of almost £1,500 per household.

Although "wages are growing in real terms and the job market is strong", Sunak is "saddled with a record that saw a contracting economy", despite the fact that the GDP was "given a boost by a growing population". 

The "harsh truth is that our economic situation is dire", said financial columnist Matthew Lynn in The Telegraph. And that is "almost entirely the fault of the prime minister". He "raised taxes too much", which has hammered household spending; froze tax thresholds, which has destroyed incentives to work; and enacted a "huge hike in corporation tax", hitting businesses hard. And there has been "virtually no attempt at bold reform". 

There is "nothing inevitable about the UK's persistently stagnant growth", Lynn said. 

Yet the worst is "probably over", said The Guardian's economics editor Larry Elliott. Governments want to "generate a feelgood factor before polling day", but "Britain, in the last three months of 2023, had the opposite: a feel-bad factor".

How will voters feel? A Savanta poll suggested on Wednesday that Labour's lead – consistent at more than 20 points for over a year – had been "dented" by the party's "recent U-turn on its promise to invest £28 billion on green projects", said the i news site. The poll puts Labour just 12 points ahead of the Conservatives, a seven-point drop compared with last month. The suspension of two parliamentary candidates over anti-Israel remarks this week "could narrow the lead further". 

But voters are unlikely to remember these rows, Twyman said. "What matters to voters in most cases is the economy, the cost of living, sometimes things like the NHS and immigration, but it's still 'the economy, stupid'."

What next?

The "heat now returns" to Sunak, said Nick Tyrone, former director of the CentreForum think tank, in The Spectator. Although "no one expected the results of these by-elections to be any different", Labour's wins suggest that polls putting Tories in "wipe-out territory" after the general election are "largely correct", and may even be underestimations. 

The "toppling" of Wellingborough "really does feel like the end of an electoral era for the Tories", said Tyrone.

The economic outlook is brighter across 2024, and Sunak still apparently believes his party can convince voters that Britain is "on the right track" in the upcoming Spring Budget, said the FT. But with an election expected in autumn, "time is running out".