What is a recession and when was the last one in the UK?
With a With the cost of living, rising fuel prices, and inflation at its peak, the UK could be in for some bad news.
The Bank of England has revealed that the UK is already in recession with a recession and interest rates at their highest level in a decade.
Interest rates were cut from 2.25% to 1.75% – the highest level since November 2008.
It also said that it now expects a 0.1% decline in GDP in the current quarter, indicating that the country is already in recession.
It is the seventh consecutive increase in the base rate and another increase is expected next year.
Previously, the CBI forecast warned by mid-June 2022 that the UK economy would be teetering on the brink of recession with growth forecasts dropping from 5.1% to 3.7%.
And, with inflation expected to remain at high levels, it says UK household incomes will face a ‘historic squeeze’, which will be reflected in consumer spending.
After this worrying news, here is exactly what caused the recession.
What is a recession?
Put simply: a recession means that there is a marked decrease in economic activity.
It is declared when the economy experiences negative gross domestic product (GDP). This is effectively how much a nation buys and produces, so reduced consumer spending is taken into account.
It is also associated with rising unemployment numbers, falling or collapsing stock markets and stagnant wages.
While depression can last for weeks, months or years, the effects of one are often felt for a long time. And, unfortunately, there is no limit to how far one can go.
The The Office for National Statistics (ONS) revealed that GDP fell by 0.3%, down from 0.1% in March 2022.
It links the impact of rising energy prices on production, along with the impact of wind on the testing and tracking program, and slowing growth.
If the decline continues for a long time, it turns into depression. This period is usually around three years or more, or when the GDP decline reaches 10% or more.
When was the UK last in recession?
The UK’s last recession wasn’t too long ago, falling during the height of the coronavirus pandemic in August 2020.
After extended closures of shops and restaurants, as well as hundreds of companies going out of business, the UK economy has taken a hit.
In fact, the country’s GDP fell by 20.4%, with many of the entire nation losing their jobs or being unemployed for a long time.
Before that, the UK faced a recession in 2009 after the financial crisis that started in 2008.
During that recession, GDP fell by 7.2% in Britain, a decline that did not end until the last quarter of 2009.
MORE The UK is already in the grip of a GDP contraction and the highest interest rates since 2008.
More: Liz Truss slams ‘too much talk of recession’ despite dire warnings
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