London (Parliament Politics Magazine) – The recent data reveals that Britain’s economy is all set to go into recession. It is unexpectedly shrinking since August and underscores a challenge for Prime Minister Liz Truss. She is promising to speed up the growth with all the right strategies. The fall in the economy is due to weakness in manufacturing. Moreover, the maintenance work happening in North Sea Oil and gas field is another problem. It has contributed to a 0.3% fall in the GDP since July. The reports reveal a jump in inflation is making consumers suffer the most.
Economists Are Pointing Towards Zero Growth
The increase in the output in July came down to 0.1% from the previous 0.2%. In three months the GDP fell to 0.3% in August. It happens to be the first decline since early 2021. For a long time coronavirus crisis are already hitting the UK. Yael Selfin, a chief economist reveals, Is UK in recession:
‘’The ongoing squeeze on household finances continues to weigh on growth, and is likely to have caused the UK economy to enter a technical recession from the third quarter of this year.” Right now the economy is back to it was before the pandemic began. Previously it was estimated to be around 1.1% according to the National Statistics.
The manufacturing however fell by 1.6% from July but it requires more maintenance than usual. As the North Sea hit the mining and quarrying sector, the slump goes by 8.2%. This includes oil and gas accordingly. According to ONS Chief Economist Grant Fitzner: ‘’Many other consumer-facing services struggled, with retail, hairdressers, and hotels all faring relatively poorly.’’
GDP Will Most Likely Weaken In Next Few Months
Many experts have revealed that the GDP of the UK is likely to weaken a lot more in the coming months. Since the funeral of Queen Elizabeth things is becoming more challenging. Furthermore, the economy falls further as inflation is surging to the fullest. It is hitting the common households while the Banks of England are raising the interest rate. Even though the growth and other activities are quite stagnant.
Britain is mourning the death of its longest-serving monarch as its economy teeters on the brink of a recession — and needs all the support it can get.
Many British businesses have scaled back their operations out of respect.
Here’s what’s happening.👇https://t.co/12TGJtX8uX pic.twitter.com/IMmqiHohm5
— Retail Insider (@BIRetail) September 11, 2022
Samuel Tombs prominent economist believes that many households will suffer due to low savings. They are likely to reduce their expenditures as the borrowing cost are going up. According to him:
“The combination of the protracted hit to real incomes from mortgage refinancing, the usual lags between changes in corporate sentiment and spending decisions, and the constraints macro policymakers now face suggests that the recession won’t end until late 2023 at the earliest’’.
The International Monetary Fund is expecting the British GDP to grow a little in 2023. This happens to be much stronger than what economists are forecasting. Even the economy of Germany and Italy is shrinking to a new level. Due to gas supply cuts in Russia, things are becoming worse.
When Will The Economy See A Rise?
The finance minister Kwasi Kwarteng is promising to speed up the economic growth of the UK. They plan to give unfunded tax cuts to keep the financial markets at ease. These markets have been in turmoil for a long time. It is raising expectations for how quickly BoE will push up the borrowing cost.
The fact that the UK is the only G7 country that is in recession is either due Brexit, the useless nature of our government or both.
— Nick Tyrone (@NicholasTyrone) November 18, 2022
The Central bank will try to low down the interest rate in the market. However, it is putting the pension funds in jeopardy. If this isn’t enough Government will try to end the emergency bond-buying support scheme. BoE is hinting at something else to the lenders privately. They will likely continue the emergency program for more time, according to the demands of the financial market.
The Long Recession
Heather believes that the UK is not in a recession as yet. Here is what he has to say:
“We won’t formally know that we are in a recession until we get the growth figures for the last quarter of this year, which will be sometime in early 2023. But the very strong expectation is that it’s the start of a recession’’. This will turn out to be different from what they had to face during the pandemic which was shorter. Global health crisis and other problems it is bringing the economy to a halt.
The recession will turn out to be bigger and longer. Most probably the Bank of England will keep the interest rate higher. “They could of course change their minds about cutting rates in the coming months. But as we stand at the moment it looks like we’re going to have quite a long period where the size of the economy is declining.”