The Office for National Statistics (ONS) reported a 0.3% contraction in GDP during the last quarter of 2023, following a 0.1% decline in the previous quarter. This marks two consecutive quarters of negative GDP growth, meeting the criteria for a technical recession.

Dr Liz Cameron, chief executive of the Scottish Chambers of Commerce, said: “Businesses were already clear about the challenges that they face, and this news should ring alarm bells for government.

“While this recessionary data is slight, it confirms what our own business research had been saying for all of 2023. That the economy remained persistently locked in a low growth cycle of stagnation as headwinds continued to weigh heavily on firms.

“The Chancellor must use the upcoming Spring Budget in just a few weeks to set out his government’s plans to help business and the economy to grow.

“Businesses need long-term certainty through an economic plan that relieves their cost pressures and helps unlock much needed investment.”

Kevin Brown, savings specialist at Scottish Friendly, commented: “The Monetary Policy Committee (MPC) will have known that there was a good chance its fight against rising inflation could lead to a recession. The data released today shows that has come to pass.

“In fact to some degree it could be argued that this was by design. The purpose of increasing the base rate was to curb demand and therefore slow down those spiralling prices. Slowing certain economic activity is an inevitable by product of that process.

“That is working to a degree, but we are still at a delicate stage of that strategy and the tight margins the MPC is working within always made this a potential outcome.”

Mr Brown continued: “The UK has been a low growth economy for some time and so there was a real risk that the medicine being administered to counter the ill effects of inflation could lead to recession. The MPC will not be too alarmed at this stage. However, confirmation of a recession puts growth firmly back on everyone’s agenda and places even more emphasis on what happens next with the base rate.

“The crucial question is when will the MPC take the pressure off the economy and many UK households by reducing the rate? Inflation is in retreat but not fully cured so we need to finish the course but that end date is a crucial call the MPC will have to make. Today’s data ramps up the pressure to do that sooner rather than later.”

He explained: “For borrowers and savers the picture remains mixed. If rates stay higher in the short-term inflation beating options for cash savers will stay available and many may still feel the attraction of easy access cash in times of economic uncertainty.

“Borrowers will continue to feel pain as the cost of borrowing stays higher than we have seen for many years.

“For UK households considering the best home for their money over the medium to long term, now might be a good time to consider investment options. Inflation will be tamed sooner or later and the hope is that the UK economy will get back to growth.

“When rates do start to fall the good cash deals currently available will start to get fewer and farther between. That could mean investing presents a good option to keep generating returns on your money if you have a longer time horizon.”