Money Wellness
Image of numerous arrows pointing down. UK in recession - what does it mean for your money
category iconcost of living
calendar icon15 Feb 2024

UK officially in recession

Official figures out today show Britain fell into recession at the end of last year.

The Office for National Statistics (ONS) estimates that gross domestic product (GDP) – the major measure of economic growth - fell by 0.3% between October and December. The drop was far worse than economists expected and followed a decline of 0.1% in the previous three months.

A recession is defined as two consecutive three-month periods where the economy contracts rather than grows.

So here we are officially in recession.

However, economists all agree that it shouldn’t be for long and the government is talking up the economy stating that ‘we’re finally turning the corner.’

What does recession mean?

A recession is a sustained period of weak or negative growth in GDP or output that is usually accompanied by a rise in unemployment.

When was the last recession?

The UK last faced recession in 2020 during the Covid pandemic. It lasted for six months but the 20.4% fall in the economy between April and June was the largest on record.

The country also spent more than a year in recession between 2008 and 2009 following the global financial crisis.

What affect does a recession have?

When the economy if buoyant, more jobs are created, people are paid more, and companies prosper from larger profits.

A recession has the opposite effect.

During a recession, less money is circulating which means less for workers, less being spent in shops and restaurants and less going to the government in tax from wages.

How will this recession affect my household finances?

During a recession, interest rates tend to go down to promote borrowing and stimulate economic activity. This isn’t great news for savers as banks will be offering lower interest rates on savings. 

However, it’s much more positive for homeowners who have been hammered by successive interest rate hikes. A recession might speed up much needed rate cuts for homeowners.

But it will have the opposite effect on the rental market. Rents tend to soar or remain high during a recession with increased competition and demand for properties.

Historically, recessions have brought waves of job losses. And as unemployment rises, businesses are also less likely to hire making finding a new job even more challenging. 

Access to credit usually also declines during a recession.

Even if you have the income to support a loan, lenders are warier of handing out money when everyone’s job security is on the line. They may tighten lending criteria and be more critical of your credit score and history.

Avatar of Caroline Chell

Caroline Chell

Caroline has worked in financial communications for more than 10 years, writing content on subjects such as pensions, mortgages, loans and credit cards, as well as stockbroking and investment advice.

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