Recession In The UK. How Might It Affect Me?
News headlines on February 15th, 2024 confirm that the UK economy has officially entered a recession. While not surprising given its long time stagnation, it will still spark concern within the economy. What does this mean for individuals, businesses, and the nation as a whole? We unpack the realities and look at ways to push through it.
Today we will cover:
Understanding the recession.
Firstly, a recession is defined as two consecutive quarters of negative economic growth. This period, the UK saw a 0.3% contraction in GDP (gross domestic product). This follows on from a 0.1% decline in the previous quarter. This recession is expected to be a shallow one and less severe than previous events. However, its cause has similarities to historic events. Experts point out that there are several contributing factors, including:
- Rising cost of living.
Inflation recently hit a 40-year high. This has squeezed household budgets and dampened consumer spending. The rate of inflation is now recovering but prices are still rising faster than they were previously. - Global economic slowdown.
Weakening growth in other countries has impacted trade and investment. This in turn has slowed the UK’s recovery after the pandemic. The ongoing drag due to the war in Ukraine along with Brexit related issues are both thought to big drivers in UK’s financial position.
A recession’s impact on you.
While the severity of this recession is expected to be milder than past downturns, it still poses a challenge. The entire UK population will feel effects of a recession to a certain extent. As with most things, there will be groups that are hit harder than others. Some of the most common effects will be:
- Job security.
Some sectors may experience job losses. Particularly in retail and construction which can quickly feel the effects of a recession. - Lower wages.
Wage growth improved to combat the cost-of-living crisis. However, wage changes may no longer keep pace with inflation, impacting purchasing power and disposable household income. - Cost-cutting measures.
Businesses may want to tighten spending. This could affect investment and potentially hiring decisions.
Riding out the recession.
During uncertain times it can be hard to know how to protect yourself against the worst effects. Here are some steps you can take to help navigate the recession:
- Revisit your monthly spending budget.
Track your income and expenses carefully. Prioritise essential needs like rent/mortgage, utilities, food, and healthcare. Explore ways to cut back on non-essentials like entertainment, dining out, and subscriptions. - Reduce debt levels if possible.
High-interest debt can quickly become a burden in tough times. Focus on paying off credit cards and other high-interest loans. Consider debt consolidation options to lower your monthly payments by switching to a zero-percent credit card, or a more manageable loan. - Build an emergency fund.
Aim to save at least 3-6 months’ worth of living expenses to cover unexpected costs or income loss. Every bit helps, so start small and build gradually. - Explore career options.
Upskilling and enhancing your skillset can improve your employability during times when searching for a suitable job may be difficult. - Stay informed.
Keep yourself updated on the economic situation and relevant government policies. This will mean that you will hear about changes that positively or negatively as soon as possible.
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The longer term prospects.
The UK’s 2024 recession presents a period of adjustment. However, it is estimated to be short lived and not too serious by any means. By understanding the risk, taking proactive steps, and using a little Mortgage Pirate common sense, we can navigate this storm. Remember, economic downturns often include positive opportunities and pave the way for innovation and change instead of complacency.
Despite the current challenges, the UK economy has weathered more severe recessions before. The government and Bank of England are already implementing measures to limit the impact, and there are reasons for optimism:
Remember you are not alone.
Finally, by being proactive, resourceful, and adaptable, you can weather the storm and emerge stronger from this period of economic uncertainty. Let’s stay united and support each other as we navigate this challenging time together. Don’t be afraid to seek help from a professional if you need it.
Talking to others about your concerns early on can help limit their damage. Connect with friends, family, and community organisations for support and resources.
Explore free entertainment options like libraries, parks, and community events. Consider borrowing books, movies, and games instead of buying them and share them amongst your family and friends.
Additional Resources:
Citizens Advice: https://www.citizensadvice.org.uk/
Let us now how the UK recession is affecting you by using the comment form below.
Post compiled by Grant Carpenter CeMAP, CeFA – 15 years of regulated mortgage advice.
Please note that the content listed within this post is purely for information purposes only and does not constitute advice.
