UK ‘teetering’ on edge of a recession with wages and living standards ‘stagnant’ | Personal Finance | Finance
The latest economic growth figures have renewed concerns the UK economy is weak and could fall into recession.
The UK economy contracted 0.5 percent in July although GDP increased 0.2 percent in the three months to July 2023.
Matthew Lesh, director of Public Policy and Communications at the Institute of Economic Affairs, told Express.co.uk: “The UK has been teetering on the edge of a recession for much of this year, and the latest GDP figures give little reassurance.
“We are also facing a slowing labour market, a similar predicament in the Eurozone and China’s economic weakness pulling down the global economy.
“A recession would mean falling inflation but also likely more people losing their jobs and lower wages.”
Mr Lesh said the UK is unlikely to fall into a technical recession at this point which would require two consecutive quarters of negative economic growth.
He added: “But this anaemic growth is hardly reassuring given Britain’s long-running stagnant wages and living standards.”
However, chief economist Paul Dales warned a mild recession may already have begun.
He said: “The decline in GDP in July suggests that underlying growth has lost momentum since earlier in the year.
“Some of the weakness was due to there being almost twice as many working days lost to strikes in July (281,000) than in June (160,000).
“That contributed to the 2.1 percent month on month and 1.1 percent month on month respective falls in health and education output.”
He said recent wet weather also impacted the construction sector which had a 0.5 percent month on month decline.
Sam Miley, managing economist for the Centre for Economics and Business Research (Cebr), said the near term outlook for the UK “remains weak”.
He said: “The economy continues to face a number of headwinds, including elevated inflation and tighter interest rates, which are hindering its growth prospects.
“The tighter interest rate environment is becoming particularly important for the growth outlook, adversely affecting the economy through a number of channels, including increasing borrowing costs and mortgage rates for households and discouraging investment amongst businesses.”
The Cebr is predicting the economy will experience a mild recession across the fourth quarter of 2023 and the first quarter of 2024.
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