Towards the end of September, the Bank of England announced that the UK is likely already in recession, with GDP falling and interest rates at their highest levels in over a decade.
Interest rates were raised from 1.75% to 2.25% – the highest level since November 2008. It is the seventh consecutive rate rise and more hikes are expected later in the year.
Now, on October 12, the ONS (Office for National Statistics) announced that UK GDP fell by 0.3% in August 2022, following revised growth of 0.1% in July 2022.
With inflation expected to remain high, UK household incomes are facing what many are calling “historic pressures” which will almost certainly be reflected in consumer spending.
Following this worrying news, here’s exactly what a recession entails.
What is a recession?
Put simply, a recession means that economic activity has decreased noticeably.
It is declared when the economy has a negative gross domestic product (GDP). This is effectively how much the nation buys and produces, so reduced consumer spending is taken into account.
It’s also associated with rising unemployment, falling or crashing stock markets, and stagnant wages.
While recessions can last weeks, months, or years, the effects are often felt for much longer, and unfortunately there is no limit to how long they last.
If a recession lasts longer, it becomes a depression. This period is typically around three years or more, or when the GDP decline reaches 10% or more.
Pronounce In their latest release, Grant Fitzner (ONS chief economist) said: “The economy contracted in August, with both manufacturing and services falling, and a small downward revision of growth in July has seen the economy contract overall over the past three months . ‘
When was the UK last in a recession?
The last UK recession was not long ago, and it coincided with the height of the coronavirus pandemic in August 2020.
The UK economy suffered significantly after a protracted lockdown that saw shops and restaurants closed and hundreds of businesses shuttered.
In fact, the country’s GDP fell a staggering 20.4%, with many across the country losing their jobs or being furloughed for extended periods.
Earlier in 2009, Britain faced a recession following the economic crisis that started in 2008.
During this recession, UK GDP fell by 7.2% and the recession only ended in the last quarter of 2009.
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https://metro.co.uk/2022/10/12/what-is-a-recession-and-when-was-the-last-uk-one-4-17548702/ What is a recession and when was the last in the UK?