With figures now in from the end of 2022, it appears the UK narrowly avoided falling into a recession last year. Despite a .5% fall in economic output (according to the ONS) during December and zero growth shown in the last few months of the year, Chancellor Jeremy Hunt, stated that the nation showed “underlying resilience” by not falling into a recession. However, he warned that we’re not fully in the clear yet.
This does not constitute advice and advice should be sought in all instances before acting on it.
The Bank of England agrees that the UK is not quite out of the woods as they expect to enter recession at some point in 2023. The good news is that they no longer expect it to be long and predictions are less severe than previously forecast.
What is a recession?
A recession is defined as a period of time when the economy shrinks for two consecutive quarters. During a recession, the economy underperforms and companies typically bring in less profit and cut more jobs leading to less tax revenue for the government.
The ONS reported a fall in health services as well as fewer operations and GP visits during the last quarter of 2023. These public services, along with teacher’s wages and education investments are a crucial factor in how the economy performs so a decline in these areas is indicative of a larger problem. Strikes that began last year and are continuing into this year will also have effects on the economy.
The Bank of England’s role in managing the economy is to raise interest rates to curb inflation and they have been doing a lot of that recently. Whether or not that is the right move to combat the cost of living crisis at the moment remains to be seen as inflation is still in double digits – 10.5%.
The near 40-year high level of inflation remains a priority for the government as their focus is on alleviating the financial strain many families are experiencing all over the country.
For more information on UK inflation and the impact on your personal finances, contact your adviser.