about 1 year ago • 2 mins
Data released on Friday revealed that the UK economy had a brush with disaster, narrowly escaping a recession last year.
What does this mean?
Economists were biting their nails as this report approached: after all, the previous quarter’s economic shrinkage meant the slightest stumble would catapult Britain into a technical recession, with the economy contracting for two straight quarters. But the UK dodged that fate by a hair’s breadth, scraping by with zero growth last quarter thanks to a bonus bank holiday and some extra World Cup spending. That said, the UK could be in for even more trouble if the tail end of the period is anything to go by: December fell short of even the gloomiest predictions, with output dropping 0.5% as folk economized and strikes walloped the country.
Why should I care?
The bigger picture: Long haul.
This result means the UK economy is still down 0.8% from where it was at the same time in 2019 – making it the only G7 economy that hasn't yet bounced back from the pandemic. To put that in context, the US has grown an impressive 5.1% in the meantime, and even the war-plagued eurozone has managed a decent 2.4%. But the Bank of England says the UK’s in for a marathon before it gets back to where it was: with energy prices and borrowing costs set to shrink the economy this year, the central bank thinks it’ll be 2026 before the economy’s in pre-pandemic shape.
For markets: FTSE’s flying.
The British economy might be staggering, but the FTSE 100 – which tracks the country’s 100 biggest stocks – strode ahead last week and smashed its own record highs. It's not hard to guess why: 80% of the revenue that FTSE 100 companies make comes from abroad – so when the pound takes a nosedive, the exchange rate works in their favor. Plus, financial, commodity, and energy firms make up a big chunk of the index, and they’re all cruising high right now.
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