UK economy plummets by 0.2% in three months, on the brink of a long recession? Read here

In the third quarter of 2022, the UK’s GDP started to plummet, and the whole country is now experiencing the blow of a long recession. The economy shrunk by 0.2 percent between July and September. Chancellor, Jeremy Hunt said 'tough road ahead' will require 'extremely difficult decisions' in November 17 budget.

The reason for this nosediving effect is because of the frailty in the manufacturing and maintenance side in the North Sea oil and gas field. This gave rise to a plunge in the GDP value by 0.3 percent between July and September 2022, respectively.

Several other reports have claimed that this recession is impacting consumers adversely, making it difficult for families to survive the economic hardship. This is the first downfall in the UK economy since the unprecedented covid-19 pandemic in 2021.




Even the analysts at the Bank of England showed concerns, feeling terrified about the UK’s long recession. The country’s recession propels the Bank of England to increase the interest rates as soon as possible despite the inevitable situation at hand.

Samuel Tombs, an economist with Pantheon Macroeconomics, has stated that 'around one-third of households no longer had meaningful savings and the 30% with a mortgage were likely to reduce expenditure as borrowing costs went up.'

He further added, 'The combination of the protracted hit to real incomes from mortgage refinancing, the usual lags between changes in corporate sentiment and spending decisions, and the constraints macro policymakers now face suggests that the recession won’t end until late 2023 at the earliest.'

The Office for National Statistics (ONS) reported that the UK economy hit by 0.2 percent between July and September, and again 0.6 percent in September itself.

If the economy faces a double whammy effect, meaning, encountering negative growth in two successive quarters, then it’s officially a recession. This would be true if the UK experiences another blow in the fourth quarter of 2022 as well.

Concerning the ongoing crisis, Chancellor Hunt commented, 'To achieve long-term, sustainable growth, we need to grip inflation, balance the books and get debt falling. There is no other way.' Hunt said the Russia-Ukraine war has led to a spike in inflation, leaving the country in flames.

On Tuesday, the IMF or the International Monetary Fund stated that the country’s GDP will thrive by 0.3% in 2023.

FAQs

Reasons why the UK is under recession?
Some of the reasons why the UK is under a long recession are due to a spike in interest rates, the cost of living has become more expensive than before, high energy prices, etc.

When was the last recession in the UK?
The UK economy faced a recession in 2009 prior to the 2008 economic downfall.