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What is a recession and when was the last UK one?

The UK is heading towards another recession (Picture: Getty Images)

With a cost of living crisis, rising fuel prices, and inflation at its highest point, the UK may be in for more bad news.

The Bank of England has revealed the UK is already in a recession with GDP falling and interest rates at the highest in over a decade.

Interest rates have been raised to 2.25% from 1.75% – the highest level since November 2008.

It has also said it now expects a 0.1% fall in GDP over the current quarter, indicating that the country is already in a recession.

It is the seventh time in a row the base rate has risen and further increases are expected later in the year.

Previously, a CBI forecast warned in mid June 2022 that the UK economy would be teetering on the edge of a recession with a growth outlook prediction down from 5.1% to 3.7%.

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And, with inflation expected to remain at high levels, it states that UK household incomes will face a ‘historic squeeze’, which will be reflected in consumer spending.

Following this worrying news, here’s exactly what a recession entails.

What is a recession?

Put simply: a recession means there has been a notable decline in economic activity.

It is declared when the economy experiences negative gross domestic product (GDP). This is effectively how much the nation is buying and producing, so reduced consumer spending is taken into account.

It is also linked to increased unemployment figures, stock markets declining or crashing and stagnant wages.

While recessions can last weeks, months or years, the effects of one are often felt for far longer. And, unfortunately, there is no limit to how long one can go on for.

A recession could turn into a depression if it goes on for a long period of time (Picture: Getty Images)

The Office for National Statistics (ONS) revealed that GDP fell by 0.3%, a higher decline than 0.1% in March 2022.

It links the effect rising energy prices have had on manufacturing, along with the impact of the winding down of the test and trace programme, to the dwindling growth.

If a recession carries on for a longer period of time, it turns into a depression. This length of time is typically around three years or more, or when the GDP decline hits 10% or more.

When was the UK last in a recession?

The last UK recession was not too long ago, with it falling during the height of the coronavirus pandemic in August 2020.

Following a lengthy lockdown with shops and hospitality venues being closed, as well as hundreds of companies going out of business, the UK economy suffered significantly.

In fact, the country’s GDP fell by a staggering 20.4%, with many across the nation losing their jobs or being furloughed for lengthy periods of time.

The last lockdown was in August 2020 amid the coronavirus pandemic (Picture: Christopher Furlong via Getty Images)

Prior to this, the UK faced a recession in 2009 after the economic crisis that began in 2008.

During that recession, GDP fell by 7.2% in Britain and the recession did not end until the final quarter of 2009.


MORE :
UK already in recession with GDP falling and interest rates highest since 2008


MORE : Liz Truss criticises ‘too much talk of recession’ despite dire warnings


MORE : How this week’s financial news affects you: What would a recession look like?

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