Will Britain fall into recession this summer?

Concerns are growing that the UK could slip into recession amid slow post-lockdown growth and depressed household incomes.

Economists have warned that the “double whammy” of slowing growth and skyrocketing cost of living following Russia’s invasion of Ukraine could result in a two-quarter drop in gross domestic product (GDP), “the very definition of a recession.” The guard.

Thanks to “weaker-than-expected” growth in February and inflation hitting its “highest level since 1992” in April, forecasters have predicted UK GDP is “on track” to expand by around 1% in the first quarter of 2022 % to grow “before that this summer put it into reverse,” according to the newspaper. According to James Smith, an economist at Dutch bank ING, the economy is likely to contract in the second quarter before expanding by just 0.2% in the third quarter.

“It’s going to be pretty close to a tech recession,” Smith told the paper. “Even if one is avoided, we’re still only going to see fairly unexciting growth numbers.”

Slowest growth in G7

Despite other claims from Boris Johnson, Britain will grow the slowest G7 Economy, such as both the cost of living crisis and Rishi SunakThe widely criticized tax increases “brake economic activity into a skid,” reported the financial times (FT).

Just last month, Johnson said at the Conservative Party Conference that the UK will have “the fastest growing economy in the G7” because of the country’s rapid vaccination programme. But a new forecast from the International Monetary Fund suggests that the economies of the other six G7 countries – the US, Japan, Germany, France, Italy and Canada – will grow faster. And economists speaking to the FT have pointed out that the UK’s economic performance was simply “average” compared to the rest of the G7.

Great Britain Business is set to rise just 1.2% in 2023 – and inflation is set to be “higher than any other G7 member and slower to return to its 2% target,” the paper said.

The UK is also at risk of entering a “prolonged” period of so-called “stagflation” – defined as a period of slow GDP growth combined with high inflation – thanks to rising consumer prices combined with sluggish economic growth, Valentina Romei reported in the IM FT.

“The specter of stagflation is haunting the UK economy,” said Ed Monk, associate director at investment management firm Fidelity International.

Protect your money in a recession

While the ongoing impact of Covid on the economy means ‘continued growth is no guarantee’ The Telegraph claimed that a real recession was “unlikely”. According to the Office for National Statistics, UK GDP contracted by 0.2% in December, but its GDP for the last three months of the year was 1% higher than the previous quarter.

However, in the event of a recession, the paper advises consumers to “pay off any expensive debt you may have, such as e.g. credit cards”. Those with multiple debts should “first address the borrowing with the highest interest rate and then move on to the next.” It also recommends building an emergency cash fund to protect against unexpected bills or periods of unemployment.

Households can lean on lockdown savings

The savings many households have accumulated during the lockdown could “cushion the blow of rising costs and falling real wages,” said John Stepek in MoneyWeek.

It also means that “a drop in income doesn’t have to mean a corresponding drop in spending,” he added.

But the biggest “unknown” in the economic equation is energy prices. If they fall instead of staying where they are — or rising higher — “it would make a big difference to both inflation and household budgets.”

Still, costs are likely to rise faster than income, investment returns and cash savings, so consumers will need to be “much more vigilant” about their investments and personal finances in 2022 – but a recession is “by no means baked in yet,” concluded Stepek.