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For the month of November, gross domestic product (GDP) in the UK grew which eased concerns over the economy. Despite this, experts are sounding the alarm that current signs are “not promising” when it comes to the likelihood of another recession. The last time the UK was deemed to be in a recession was during the peak of the Covid-19 pandemic.
Last week, figures from the Office for National Statistics (ONS) showed that the country’s economy grew by 0.1 percent in November.
This is despite forecasts from economists, who predicted GDP in the UK would contract by 0.3 percent.
Analysts cite the World Cup giving pubs and restaurants a much needed boost as to why the economy grew over the month.
The Government will be anxiously awaiting the GDP figures for December to ascertain whether this is a sign of a trend or an aberration.
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What is a recession?
A recession is the term used to describe a prolonged and significant downturn in a country’s economy.
Most economists recognise this as having taken place when two consecutive quarters of negative GDP.
According to the Office of Budget Responsibility (OBR), the UK’s economy is expected to fall by 1.4 percent in 2023.
The independent fiscal watchdog believes the forecast recession will result in an overall drop of two percent in GDP.
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Victor Trokoudes, the founder and CEO of money app Plum, shared what these latest GDP figures mean for the economy.
He explained: “Either way, this news is likely to put more pressure on the Bank of England to raise rates more quickly. If you’ve got money saved, this is good news; interest rates have been increasing sharply in tandem with the base rate.
“Savers will need to be quick off the mark to make sure their money is earning as much interest as possible to beat inflation.
“Of course, higher interest rates are always less good news for homeowners with a mortgage, who will continue to see the interest on their repayments increase, adding to the squeeze on people’s wallets over the coming year.”
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As it stands, the Bank of England’s Monetary Policy Committee (MPC) has raised the nation’s base rate nine consecutive times to 3.5 percent.
This has been carried out to mitigate the detrimental impact of inflation on the economy which is sitting at 10.7 percent.
One of the consequences of this is that mortgage and debt repayments have skyrocketed in recent months, placing unprecedented pressure on households.
According to Plum’s CEO, Britons need to get on top of their finances to weather the storm of a potential economic downturn.
The finance expert broke down what needs to be looked at to determine whether the UK will fall into a full-on recession, citing that the current signs are “not looking promising”.
Mr Trokoudes added: “We will need to see how growth fared in December – a difficult month for the nation’s finances, with strikes and the cost of living crisis putting a damper on the usual levels of Christmas spending.
“Our own data from December showed that people showed restraint while they shopped, for example only spending one percent more than last year on groceries.
“Recession or not, there’s no getting away from the fact that the next 12 months will be difficult for everyone’s finances, especially if your mortgage is up for renewal, and people will need to use all the tools at their disposal to remain financially resilient over the months ahead.”
