over 1 year ago • 2 mins
Data out on Friday showed that the UK economy shrank last quarter.
What does this mean?
A dastardly duo of wicked prices and rising interest rates is playing havoc with the UK, with the gruesome twosome tanking the economy by 0.2% last quarter. That wince-inducing shrinkage isn’t just down to the extra day off for the Queen’s funeral in September, either: that month’s 0.6% shrink didn’t help matters, sure, but the contraction was already setting in back in August.
The freeze is probably down to a few factors, like feeble manufacturing, dwindling household spending, and underpowered retail sales – those last two are biggies, since consumer spending makes up a burly chunk of Britain’s economy. Put it all together, and you get the first quarterly fall since the locked-down days of early 2021 – leaving the UK the only G7 country yet to fully recover from the pandemic.
Why should I care?
Zooming in: Downhill from here.
Things aren’t likely to improve anytime soon: the Bank of England forecast that last quarter would ring in a recession that could take up to two years to shake, and all signs suggest they’re on the money. Just look at manufacturing firms’ inventories: those handy litmus tests of corporate confidence are being cut across the board, amid fears that the cost of living crisis will further gut spending.
The bigger picture: Tightening belts.
How deep this recession goes will probably be decided by whether Brits start spending the £200 billion ($235 billion) in savings they’ve put aside since the pandemic began – assuming they actually have a choice. See, with Brits’ take-home pay reportedly poised for a hit in next week’s budget, folk might have to start dipping into their savings whether they like it or not. The government’s rumored to be gearing up for a whole raft of tax increases and spending cuts, and the budget’s already being called the biggest tightening in government policy since 2010.
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