LONDON (Dispatches) --
Britain’s economy remains on course for a long-lasting recession on fallout from the highest inflation in decades, analysts said on Monday, even if official data showed growth in October.
Gross domestic product rebounded 0.5 percent in the month, the Office for National Statistics (ONS) said. GDP had dropped 0.6 percent in September, in part owing to businesses closing for the funeral of Queen Elizabeth II.
ONS director of economic statistics, Darren Morgan, said the economy was helped in October especially by car sales which “rebounded after a very poor September, while the health sector also saw a strong month”.
Despite the rebound, Britain’s finance minister Jeremy Hunt spoke of “a tough road ahead”.
“High inflation, exacerbated by (Russian President Vladimir) Putin’s illegal war, is slowing growth across the world, with the IMF predicting a third of the world economy will be in recession this year or next,” he said in a statement.
The UK government and Bank of England have each said they believe Britain is already in a recession that the BoE expects to last all next year.
The main reason for the bleak outlook is fallout from British inflation, which at above 11 percent is the country’s highest level in more than 40 years.
Britons are seeing their wages squeezed, triggering mass strike action by public and private sector workers across the UK.
Energy bills and food prices have rocketed this year on supply constraints caused by Russia’s invasion of Ukraine and the reopening of economies from pandemic lockdowns.
The European Union has enough gas for the winter but could face a shortage next year if Russia cuts supplies further, the International Energy Agency (IEA) said on Monday, urging governments to act faster to save energy and expand renewables.
Next year may pose an even tougher test than the energy crunch that has this year hiked fuel bills for European households and forced industries to temporarily close to avoid crippling gas costs.
If Russia was to cut the small share of gas it still delivers to Europe, and Chinese gas demand rebounded from COVID-19 lockdown-induced lows, the EU could face a gas shortfall of 27 billion cubic metres (bcm) in 2023, the IEA said. Total EU gas consumption was 412 bcm in 2021.
“This is a serious challenge,” IEA Executive Director Fatih Birol told a press conference with the European Commission in Brussels.
European Commission President Ursula von der Leyen suggested forming an EU “solidarity fund” to raise cash for energy investments - using both EU money and additional funding sources.
Von der Leyen said the bloc’s gas supply was “safe for this winter” and the 27-country EU was preparing for the next one.
EU country leaders will call for the preparation of early contingency plans for energy supply next winter at a summit in Brussels on Thursday, according to a draft of their meeting conclusions seen by Reuters.
However, countries are still at odds over how to address high energy prices. Their energy ministers hold an emergency meeting on Tuesday to attempt to agree a gas price cap that has divided the bloc.
Last month countries held up deals on other measures over the price cap spat - including faster permits for renewable energy projects that will be crucial to replacing Russian gas and meeting the EU’s climate goals.