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The economy of UK is in peril. UK records GDP decline of 0.1% in July-September quarter, following a quarter of zero percent growth rate despite initial suggestions of 0.2% growth rate.
The current discussion on recession hinges on the quarterly growth report of the current quarter, and if GDP continues to decline, UK would officially enter a recession in 2024.
At present the country is not in recession. For a nation to be in recession, it has to witness GDP for two quarters consequently. At the moment, the UK has witnessed negative growth in one quarter. In case the nation witnessed negative growth this quarter as well, the country will officially be in recession.
As per the economist report of NIESR, there are 60% chances of UK entering a recession by the end of 2024.
To add to the misery, as the report of ‘The Guardian’ highlights, many people are moving out of cities since they can’t afford exorbitant housing prices across cities such as London. The data for the year ending in June 2023 reveals a substantial increase in the emigration trend, with 37,000 more individuals choosing to depart from the UK than previous year.
As difficult as it might be to digest that the nation which once ruled almost every nation in the world is suffering to even maintain a positive global perception; it is true.
The fears of economic unrest in UK are intertwined with political instability. The country is facing economic unrest since post pandemic. In the past six years, UK has received five Prime Ministers, three in 2022 alone. However, the economy was slowly increasing but the political unrest created by the resignation of Lizz truss in September, 2022, the former prime Minister of UK, Amplified the issue. The inflation rate increased, causing cost of living crises nation-wide.
The resignation of former Prime Minister Liz Truss intensified the already-delicate situation. Truss's 45-billion-pound tax reduction package, implemented during her brief 45-day tenure, backfired on her, impacting the country's global reputation. The policies were criticized for primarily benefiting the wealthiest, leaving the middle class burdened with higher mortgages. To add to that misery, the prices of pound fell significantly, cashing the market and global reputation of UK.
In the aftermath, the economy of the country degraded further- remaining in double-digit inflation for more than 2 quarters. At the same time, country witnessed cost-of-living crises, bringing thousands of healthcare workers and education staff on the roads to protest against the rising prices of everyday items.
Amid the economic and political unrest caused by COVID-19 Pandemic, the UK entered a recession in August 2020, leading to a substantial contraction in the economy. Between April and June 2020, the country experienced a record-breaking decline of 20.4% in Gross Domestic Product (GDP) compared to the first quarter of the year, signifying the severity of the economic downturn. The significant economic disruption in the nation was caused by Pandemic and Brexit, fanned by Russian-Ukraine Conflict. Piling on, the political instability in the country also contributed to the economic unrest nationwide.
In November, 2023, the inflation rate was at 3.9%, sharp decline from 11.1% in October, 2022, which was recorded as highest in the past 41-years. Despite the downfall, the inflation in UK is still 3.9% more than the previous year.
To get a hold of the economic condition, rigid monetary policies acted as bitter medicines.
On one hand, people are moving from sub-urban to affordable locations; on the other hand, businesses are opting out of the UK. Eurostar, the European railway service providers, have announced to reduce its operations by 25% between London to Brussels and Paris in 2024. Barclays, the British Bank, moved its headquarters from London to Dublin following the complexities in trade after Brexit.
Netflix, the giant online streaming platform moved its headquarters from London to Amsterdam in February this year; Nissan, the global automobile manufacturer, planned to move its Qashqai model out of UK, but has planned to stay after receiving 2 billion pound investment from the UK government under Automotive transfer funds.
The economic landscape of the country is met with challenges at the moment. The recent decline in the GDP by 0.1% in the July-September quarter, coupled with ongoing discussions about the trajectory of the economy, has heightened the recession concerns.
The chances of UK entering a recession in 2024, as highlighted by the report of NIESR stand at 60%, highlighting the strong possibility of UK entering into recession in the coming year.
As a result, people and global businesses are moving out in the search of more affordable options.
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