UK Economic News: Is the UK in a Recession?
The recent economic projections are sparking discussions about the UK’s economic health and the looming possibility of a recession. While the UK’s GDP (Gross Domestic Product) showed a slight 0.2% growth, beating the earlier estimates of 0.4% made in July, there are definite concerns about the UK economy falling into recession.
I can vividly remember the worries surrounding the last UK recession following the economic crash of 2008. It’s understandable to be worried about a repeat of this event and how this would affect you, your family and your finances. While a recession is certainly not great news for the economy, it is possible that it could be avoided.
If you’re concerned or uncertain about how UK economic changes may affect you, don’t worry. I’m here to explain in simple terms what’s happening currently with the UK economy, if we’re at risk of recession and what might happen next.
QUICK SUMMARY – Is the UK in a Recession due to GDP Challenges?
The UK is not currently in a recession but there are some risks of this happening within the next year. How would a recession affect UK consumers and their families?
- The Bank of England interest rates slowing in increases is a good sign for the UK economy. This paired with decreasing inflation and wage increases may help the UK to narrowly avoid a recession this year.
- There are support services and resources available for anyone concerned about their financial situation or struggling with debts such as Citizen’s Advice, National Debtline or StepChange.
- UK residents with a mortgage or anyone thinking of applying soon should be prepared to work with tighter budgets if a recession happens. Lenders will likely tighten restrictions for new lenders, which is where it can be most helpful to get some advice from a qualified mortgage broker.
What is happening with the UK economy?
There’s a cloud of uncertainty as the GDP growth expectations for 2024 have been slightly downgraded from 0.8% to 0.7%. The UK’s economy may indeed be on the brink of a recession, which is raising alarm among analysts and the public alike.
Is falling inflation affecting UK recession predictions?
Inflation is now expected to fall faster than anticipated, with potential for a 4.5% rate by the end of 2023, ultimately aligning with the Bank of England’s 2% target during the second half of 2024. The path toward reducing inflation is seen as a key step in avoiding a recession in the UK economy.
How will consumers be affected if the UK is in recession?
Hywel Ball, EY UK Chair has commented on how consumers may be impacted by a UK recession: “The cost of debt is set to be the biggest headwind for the UK economy over the next 12 months, with consequences for both businesses and consumers.” The possibility of high-interest rates potentially impacting the UK’s recession situation is a key issue.
Despite the looming worries of a recession in the UK economy, several factors provide a glimmer of hope. Falling inflation, rising real wages, and healthy financial positions for both households and businesses signify resilience. The recent surge in business investments is a promising indicator that the UK’s growth potential may be reawakening.
Realistically, the concerns about a UK recession are real and ongoing. As the UK navigates its economic challenges, the well-being and financial stability of consumers remain a central focus in the discussions about the potential recession in the UK.
If you are concerned about your financial situation, there are several organisations that can offer free advice and support:
How would a UK recession affect mortgages?
These economic forecasts carry significant implications for anyone with a mortgage or those who are thinking about a new mortgage application. The potential for the UK to slip into a recession, as hinted by the downgraded GDP growth projections for 2024, raises concerns about financial stability.
For existing mortgage holders, the prospect of a recession highlights the importance of proper financial management. It’s definitely worth considering how you would be hit financially by the effects of a recession and if your current mortgage repayments will still be affordable.
Those thinking of buying a home or remortgaging would potentially be hit with tighter conditions for lending. This is because banks and building societies will normally be much more cautious about who they lend to during periods of financial difficulty.
There are some factors that are positive though which could be helpful for current mortgage and new borrowers. Falling inflation, interest rates and wage increases do indicate the potential for positive changes in the mortgage market.
More mortgage news
Here’s more of the latest news about mortgages and finance in the UK.