Will Britain fall into a recession this summer?

Concerns are growing that Britain might slip into a recession amid slow post-lockdown growth and squeezed household incomes.

Economists have warned that the “double blow” of slowing growth and sky-rocketing living costs after the Russian invasion of Ukraine could see a fall in gross domestic product (GDP) for two consecutive quarters, “the definition of a recession”, reported The Guardian. 

Thanks to “weaker than expected” growth in February, and inflation reaching its “highest levels since 1992” in April, forecasters have predicted that UK GDP is “on track” to grow by about 1% in the first quarter of 2022, “before slipping into reverse this summer”, said the paper. The economy is likely to shrink in the second quarter, before growing by just 0.2% in the third quarter, according to James Smith, an economist at the Dutch bank ING.

“It’ll be pretty close to a technical recession,” Smith told the paper. “Even if one is avoided then we’ll still only see fairly unexciting growth numbers.”

Slowest growth in G7

Despite assertions otherwise from Boris Johnson, the UK is set to be the slowest-growing G7 economy, as both the cost-of-living crisis and Rishi Sunak’s widely criticised tax increases “slow economic activity to a crawl”, reported the Financial Times (FT). 

Just last month Johnson told the Conservative Party conference that due to the country’s speedy vaccination programme, the UK was set to have “the fastest growing economy in the G7”. But a new International Monetary Fund forecast has tipped the economies of the other six G7 countries – US, Japan, Germany, France, Italy and Canada – to grow faster. And economists speaking to the FT have pointed out that the UK’s economic performance compared to the rest of the G7 has simply been “average”.

Britain’s economy is set to increase by just 1.2% in 2023 – and inflation is tipped to be “higher than every other G7 member and slower to return to its 2% target”, said the paper. 

The UK is also at risk of entering into a “prolonged” period of so-called “stagflation” – defined as a period of slow growth in gross domestic product coupled to high inflation – thanks to surging consumer prices coupled with sluggish economic growth, reported Valentina Romei in the FT.

Article source: https://www.theweek.co.uk/news/uk-news/956475/britain-recession