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Updated December 22nd, 2023 at 20:58 IST

Dark clouds over Christmas: UK on brink of recession after GDP dip

A potential recession could have widespread consequences, impacting everything from job security and living standards to business investments.

Sagar Kar
Chancellor of the Exchequer, Jeremy Hunt
Chancellor of the Exchequer, Jeremy Hunt | Image:AP
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The UK economy is teetering on the brink of recession after shrinking in the latest quarter, raising anxieties about a potential downturn just as the holiday season kicks in. While not yet officially in recession, the 0.1% contraction in GDP for July-September follows months of sluggish growth, fueling concerns about the country's economic health.

This recent slip comes after revised figures from the Office for National Statistics (ONS) revealed zero growth in the second quarter, effectively erasing earlier optimistic projections. The decline marks a worrying trend, echoing the fears of many economists who have been warning of potential headwinds facing the UK economy.

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Here is what you need to know

Several factors are converging to create this perfect storm. Soaring inflation, fuelled by the war in Ukraine and global supply chain disruptions, is eroding disposable incomes and dampening consumer confidence. Rising interest rates aimed at tackling inflation are further squeezing businesses and households, potentially stifling spending and investment.

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What exactly does recession mean?

The technical definition of a recession is two consecutive quarters of negative GDP growth. While the UK managed to avoid that fate in the first half of the year, the shrinking economy in the third quarter and ongoing economic pressures make the possibility of a recession in the new year all too real.

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A look at consequences

A potential recession could have widespread consequences, impacting everything from job security and living standards to business investments and government finances. Consumers might tighten their belts further, businesses might hesitate to expand, and unemployment could rise, painting a bleak picture for the UK economy.

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UK isn't in recession yet

The next few months are crucial, with the fourth quarter GDP figures due in February. These figures will determine whether the UK officially slides into recession or manages to navigate the choppy waters. Regardless of the technical label, the current economic slowdown is already taking a toll, and policymakers and businesses alike will be scrambling to find solutions to steer the UK economy back on the path of steady growth.

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Published December 22nd, 2023 at 20:58 IST

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