UK economy still set for tough times

While today's economic figures look at what happened in November, what matters now is what happens in 2023, as rising debts, interest costs, and still elevated food and energy prices hit consumers hard.

The official statistics released this morning suggest a formal technical recession may not have started in 2022. The final quarter of last year could see small growth or be flat. The unseasonal Qatar World Cup helped, it seems. But in economic terms, we haven't even qualified from the opening group stages of this situation just yet.

The immediate consequence of slightly better-than-expected data is that it increases the likelihood of further base interest rate rises from 3.5% to 4% by the Bank of England, from early next month.

The Bank is currently grappling with whether supply challenges for goods and in the workforce are having a long-term impact on the economy.

A number of factors, from post-Covid supply chain issues to post-Brexit trade constraints, and especially a shrinkage of the workforce, are being given a thorough annual assessment by the Bank ahead of the release of its new forecast.

Decision-makers have some theories, but are not certain why the UK stands out from other similar countries that did see their entire workforces return after the pandemic.

• UK economy beats expectations with November growth

• What is a recession and how could it affect me?

All of this matters because the Bank will judge whether the economy is not as efficient as it was, and is more prone to high and sustained prices.

It's what the experts refer to as the economy's "speed limit". If that has been lowered for this variety of reasons, interest rates will go up further, above 4%, and, as importantly, stay there for longer. If not, household and corporate borrowers might get some respite.

In the short-term, the full impact of even existing higher rates, and of energy price rises, is yet to be felt in household finances.

So while a technical recession may not now prove to have started in June, most economists anticipate we are probably, right now, still in one. And for millions of households, it will certainly feel like that.