Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Report says UK to enter recession within months

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The NIESR said a recession is on the horizon, with gross domestic product set to shrink in the second half of this year and in the first months of 2023

A new report has warned Britain is set to see the return of stagflation, the condition which saw the country dubbed the ‘sick man of Europe’ in the 1970s.

A combination of slow growth, high unemployment and rising prices will continue to dent living standards and plunge more families into hardship, it warned.

The National Institute of Economic and Social Research (NIESR) said a recession is on the horizon, with gross domestic product set to shrink in the second half of this year and in the first months of 2023.

The think tank said the recession may well be a ‘relatively shallow one’ but warned there is an ‘increased possibility of a deeper recession’.

Overall, growth will be at 3.5% for this year when increases in the first half are taken into account but the rate will hover just above flatlining by the end of 2023, it warned.

The squeeze on budgets, the NIESR predicted, will mean that one in five households will have no savings by the end of 2024 and the number of people living pay cheque by pay cheque will have doubled to 6.8 million in the same period.

The report found that inflation will peak at around 11% in the last three months of this year but will fall back to 3% by the end of 2023.

Professor Stephen Millard said: The UK economy is heading into a period of stagflation with high inflation and a recession hitting the economy simultaneously.

He said the Bank of England will need to raise interest rates to 3%, a move which will increase government debt and hit homeowners.

The report called on the next prime minister to increase universal credit payments by £25 per week for at least six months from October, which would cost around £1.4 billion, and also to increase energy bill relief payments from £400 to £600 for 11 million low-income households, costing £2.2 billion.

It warned the 10% of poorest households will suffer if benefits don’t rise as government help on energy bills does not fully make up for the pain of inflation.

With growth either in reverse or low and inflation persistently high, low wages will complete the trio of pressures on working people.

The amount of money in people’s pockets will fall by 2.5% in 2022 alone and is forecast to be 7% below where it would have been before Covid-19 hit by 2026.

Around 3% to 5% of this hit will come from Brexit, 1% to 3% from energy price rises and the remainder from government policy, NIERS said.

Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.



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