Money, money, money: UK recession on the horizon as the economy shrinks
According to new ONS figures wet weather and strikes have caused the economy to shrink by 0.5%.
Despite the UK weather clearing up, the UK economy still remains in a dark and dreary place as new figures show the economy shrank to 0.5% in July, heightening fears of a recession in the second part of this year.
One of the main reasons the economy has plummeted is strikes that were organised by junior doctors which reduced health service activity. In addition, although gross domestic product (GDP) analysts expected the economy to fall back to 0.2%, retailers experienced a major dip in July as it has been recorded as a the sixth wettest on record.
Following this catastrophic news, experts at the consultancy Capital Economics warned the UK might already be in recession. Chief UK economist, Paul Dales, said July’s drop would mean the Bank of England’s estimation of a 0.4% growth in the third quarter of the year was a target far from reach.
Commenting on the news, Rachel Reeves, the shadow chancellor, said the findings were ‘dismal’ and found ‘the British economy remains hostage to the Conservatives’ low growth trap that is leaving people worse off.’
However, on a more positive note, Paul Dales forecast that wage growth and tough core inflation meant Bank policymakers would again rise interest rates from their current level of 5.25% when they next meet on 21st September in a bid to avoid the country entering a recession.
Although this isn’t good news for people with a mortgage as current interest rates, which are set at 6.75%, are already forcing people out of pocket.
Jeremy Hunt, UK chancellor, said: ‘Only by halving inflation can we deliver the sustainable growth and pay rises that the country needs.
‘But there are many reasons to be confidence about the future. We were among the fastest in the G7 to recover from the pandemic and the IMF have said we will grow faster than Germany, France, and Italy in the long term.’
Image: Napendra Singh
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