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UK Recession News – Economy shrinks by 0.3%

With the UK officially in a recession, we breakdown what this means for consumers in the UK and what you can do if you are struggling financially.

A photo of Grace Lynch, the author

By Grace Lynch

Published on: 15 February 2024

6 min read

UK Recession News – Economy shrinks by 0.3%

Official figures from the Office for National Statistics (ONS) have revealed that the UK slipped into recession in the last 3 months of 2023. This is due to the economy unexpectedly shrinking by 0.3% between October – December. This is bad news for Rishi Sunak and his Conservative government, especially with a general election looming this year.

The Prime Minister had promised to focus on economic growth back in January 2023, but it seems that he has been unable to keep this promise. The economy only grew by 0.1% overall during 2023. With the economy shrinking for 6 consecutive months at the end of 2023, the UK is officially in a recession.

The main questions we have at MPO are how this recession will affect consumers and what is the government doing to help the UK economy to recover. The UK Chancellor Jeremy Hunt will be announcing the latest UK budget in less than 3 weeks. Our financial experts strongly believe that urgent action is needed from the government to boost the economy sooner rather than later.

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60-Second Summary – UK Recession News – Economy shrinks by 0.3%

The UK slipped into recession in the last quarter of 2023, with the economy shrinking by 0.3%. This is going to create challenges for both consumers and the Conservative government, who will need to improve things to have any chance of winning this year’s general election.

  • Recession affects consumers negatively, leading to reduced business investment, higher unemployment, and limited consumer spending.
  • It’s hard to predict the length of this recession, but in most cases a recession can last between 6 – 18 months. The government will likely need to focus on this for the first half of 2024, to avoid the UK’s economic situation getting worse.
  • Individuals and families may face financial stress and uncertainty during a recession, with potential impacts including job losses, reduced working hours, and higher costs for household expenses.
  • Support services such as Turn2us and National Debtline are available for financial assistance and debt management advice. You can also speak to your energy supplier, mortgage lender etc. to see if there if you qualify for additional support.

A recession happens when there has been a significant decline in economic activity. This is normally seen in a decrease in gross domestic product (GDP), income, employment and retail sales.

There are various reasons that a country (economy) might fall into recession including a drop in consumer spending, less investment in businesses or other external factors.

The definition of a recession is when an economy has shrunk rather than grown for two consecutive three-month periods (two ‘quarters’). This happened at the end of 2023, with the economy shrinking by 0.3% between October and December.

This would indicate that the UK is now in a recession, which can cause many issues for UK consumers.

This video from Sky News explains more about the current financial situation in the UK, noting that the economy is in a far worse state than expected.

UK economy enters recession as GDP falls 0.3%

As mentioned in the interview, Bank of England interest rates and inflation have contributed to limited economic growth in the UK. This period of economic ‘stagnation’ follows the impact of factors like Brexit and the Coronavirus (Covid-19) pandemic.

When a country falls into recession, consumers are often affected negatively by this. With less business investment now happening in the UK, unemployment and redundancy may rise.

In this situation, most people will understandably spend less to try and save money. Less consumer spending is usually unavoidable here, but it does feed into the economic issues causing the recession.

Financial markets can also become more unstable, which would impact the price of stocks and shares. The cost of living in the UK is also extremely high now, which has caused a significant cost-of-living crisis. Many families are now struggling with the cost of essentials like food, electricity and mortgage or rent payments.

To avoid complete economic chaos, the government needs to act swiftly to try and stop the country from falling further into recession this year.

When was the last recession?

The last major recession that happened in the UK was in 2007 – 2008, following the global financial crisis at the time. This a time that is sometimes referred to online as the ‘Great Recession’ as it affected countries across the World, not just the UK.

The UK also experienced notable financial issues during and just before the Covid-19 pandemic, due to the national lockdown’s effect on the economy. This is something that the UK has been trying to recover from since 2020 – 2021, with this being one of Rishi Sunak’s main goals when he became Prime Minister.

This chart from the Office for National Statistics shows that while the UK did experience growth during the first half of 2023, this did not continue through the rest of the year.

Chart from the Office for National Statistics

Most economists are predicting that we are now in a ‘shallow’ recession, meaning that the economy won’t shrink dramatically. It is also widely hoped that the recession will be ‘short and sharp’ and won’t cause too much long-term impact.

The length of a recession can vary based on various factors with the main deciding factors being the impact of the initial recession and how effective any new government policies are at reducing it.

Recessions can last years, but in most cases, recessions will last for around 6 to 18 months at most. The economic recovery can also be slower after a recession, so we are likely to feel the effect of this recession for most of 2024.

Recessions can cause financial stress and uncertainty, which can be tough to deal with for individuals and their families. It’s possible that working hours may be cut or the cost of bills and expenses will be higher.

If you find yourself struggling financially due to the impact of the recession and cost-of-living crisis, there are support services available that can help.

You can use the Gov.uk Benefits Checker to see if there are any additional benefits that you are entitled to which can support you financially. You could be entitled to various forms of support including Universal Credit or Pension Credit and it’s best to check so you don’t miss out.

If you are worried about your debts or the possibility of falling into debt, you can contact any of the below services/charities for advice.

Turn2us

Turn2us is a national charity which focuses on helping people who are experiencing financial difficulty or insecurity. Their website contains helpful tools including a free benefits calculator and a free grant search tool, which checks if you are eligible for charity grants.

You can find all links to Turn2us support services here: Turn2us – Get Support

National Debtline

National Debtline has provided free and impartial advice about debt to more than 100,000 people across the UK. Their experts can advise you on how to create a simple budget, how to make the most of your money and all the options for managing your debt.

You can call and speak to one of their impartial debt advisors for free by calling Tel: 0808 808 4000.

If important bills like energy bills or mortgage payments are becoming unmanageable, you should contact your supplier/lender directly. Many of these businesses have support schemes in place that consumers are unaware of.

In the case of your mortgage, you may be able to take a brief ‘payment holiday’ while you get back on your feet financially. You could also save money by reviewing your current mortgage and switching to a new deal with a lower interest rate.

This is a big decision to make though, so it is usually a good idea to speak to a qualified mortgage broker before making any decisions.

More finance news

Here are more of the latest financial news stories and articles that affect consumers across the UK.

Current inflation rate UK 2024 – Rate remains at 4%

Aviva PLC. takeover of AIG Life UK investigation 2024

BoE base rate decision: Interest rates hold at 5.25%

Insurance complaints – FOS predicts 44,300 in 2024

UK CPI inflation figures reveal first increase in 10 months

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