As the nation enters what is anticipated to be the longest recession in history, the UK economy contracted between July and September. During the three months, the economy shrank by 0.2% as rising prices hit both households and businesses.
When an economy contracts for two consecutive three-month periods, a nation is said to be in a recession. By the end of the year, the UK is anticipated to have joined one. A two-year recession that is “very challenging” has been predicted by the Bank of England.
A recession has been widely anticipated in the UK as a result of the skyrocketing costs of goods like food, fuel, and energy, which are the result of a number of factors, including the conflict in Ukraine.
Increased costs of goods have caused many households to struggle and reduce their spending, which has begun to hurt the economy.
A country’s economy is not doing well if it is in a recession.
Companies typically make less money and the unemployment rate increases during recessions. It’s more difficult for graduates and school dropouts to land their first job.
As a result, the amount of taxes collected by the government to fund public services like healthcare and education is reduced.
The UK recession, according to the Bank of England, will last the longest it has since records have been kept in the 1920s, and unemployment will nearly double.
Jeremy Hunt, the chancellor, declared that he would work to make any recession “shallower and quicker” than forecast.
But in order to “restore confidence and economic stability,” he has issued a warning about the “eye-watering” choices that must be made regarding public spending and taxation.
Hunt stated that he had “no illusions that a difficult road lay ahead.”
In the upcoming Autumn Statement, which comes as households are being squeezed by the worst cost-of-living crisis since the 1950s, he is expected to outline his tax and spending plans.
Sam Burrows, managing director of Bristol Beer Factory, told the BBC that he has recently been debating how much of his company’s skyrocketing operating expenses can be passed on to customers.
“We can’t price consumers out. We need people in pubs eating, drinking and enjoying the hospitality sector, so it’s a balancing act for me,” he said.
Burrows claimed he wanted to invest and grow his company but was constrained by the current financial situation.
He did note that the timing of both the World Cup and Christmas was favorable.
“A bit of national pride and some positive energy with a good performance in the World Cup, Christmas spending, it’s all going to help hospitality,” he added.
High price increases are being experienced by nations all over the world, but the UK economy is performing the worst when compared to that of other large countries and has shrunk since the Covid pandemic.
Business investment in the UK decreased in the three months leading up to September, according to the Office for National Statistics (ONS), which also noted that it was still below pre-pandemic levels.
The value of all the goods and services produced in the UK is used to gauge the economy’s performance. The gross domestic product is this figure (GDP).
According to the ONS, a decline in manufacturing that was observed “across most industries” was what caused the GDP to decline in the three months leading up to September.
The ONS releases its estimate of GDP, which is occasionally revised either higher or lower. For instance, it initially projected that the economy contracted by 0.3% in August but later revised that estimate to reflect a 0.1% contraction.
Customer-facing industries also “failed badly,” according to Darren Morgan, director of economic statistics at the ONS. Shops were particularly hard hit as a result of people cutting back on their spending.
The biggest issues that businesses are currently facing, in Mr. Morgan’s opinion, are the rising cost of energy and raw materials.
He claimed that some businesses had reduced costs by being “far more diligent,” utilizing energy-efficient equipment, and switching suppliers.
The additional bank holiday for the funeral of Queen Elizabeth II, according to Morgan, contributed to the economy’s weak performance in September by causing some businesses to close or operate with fewer hours. September alone saw a 0.6% decline in the economy.
The most recent economic data, according to Labour’s shadow chancellor Rachel Reeves, is “another page of failure in the Tories’ record on growth.”
“Britain’s unique exposure to economic shocks has been down to a Conservative-led decade of weak growth, low productivity and underinvestment and widening inequality,” she added.
The latest economic data, according to Martin McTague, chairman of the Federation of Small Businesses, is “dreadful news” for businesses that are already under stress.
“Lower levels of reserves and resources mean they are more vulnerable to downturns, and at a time when confidence is deteriorating in both consumers and businesses, the outlook for the UK economy is now very bleak indeed,” he said.
(Adapted from BBC.com)