London Daily

Focus on the big picture.
Wednesday, Jul 16, 2025

Recession looms as UK economy starts to shrink

Recession looms as UK economy starts to shrink

The UK economy shrank between July and September as the country heads into what is expected to be the longest recession on record.

The economy contracted by 0.2% during the three months as soaring prices hit businesses and households.

A country is in recession when its economy shrinks for two three-month periods in a row. The UK is expected to be in one by the end of the year.

The Bank of England has forecast a "very challenging" two-year recession.

A recession has been widely expected in the UK due to the prices of goods such as food, fuel and energy soaring, which is down to several factors, including the war in Ukraine.

Higher prices for goods has led to many households facing hardship and cutting back on spending, which has started to drag on the economy.

When a country is in recession, it's a sign that its economy is doing badly.

During recessions, companies typically make less money and the number of people unemployed rises. Graduates and school leavers also find it harder to get their first job.

This means the government receives less money in tax to use on public services such as health and education.

The Bank of England expects the UK recession to be the longest since records began in the 1920s and said unemployment will almost double.

Chancellor Jeremy Hunt said he would try to make any recession "shallower and quicker" than predicted.

But he has warned of "eye-watering" decisions needed on public spending and taxation to "restore confidence and economic stability".

Mr Hunt said he was "under no illusion that there is a tough road ahead".

He is set to unveil his tax and spending plans next week in the Autumn Statement, which comes as households are being squeezed by the worst cost-of-living crisis since the 1950s.


'World Cup and Christmas key'


The brewing sector is under "extreme pressure", says Sam Burrows

Sam Burrows, managing director of Bristol Beer Factory, told the BBC he has been weighing up how much of his soaring business costs can be passed on to customers in recent months.

"We can't price consumers out. We need people in pubs eating, drinking and enjoying the hospitality sector, so it's a balancing act for me," he said.

Mr Burrows said he wanted to invest and expand his business but was having to factor in the current economic climate.

However, he said the World Cup and Christmas were coming at the right time.

"A bit of national pride and some positive energy with a good performance in the World Cup, Christmas spending, it's all going to help hospitality," he added.

Countries all around the world are experiencing high price rises, but the UK economy is performing the worst compared to other major nations, and is smaller than it was before the Covid pandemic.

The Office for National Statistics (ONS), which published the economic growth figures, said UK business investment had dropped in the three months to September and also remained below its pre-pandemic levels.

The performance of the economy is measured by the value of all the goods and services produced by the UK. This number is known as the gross domestic product (GDP).

The fall in GDP in the three months to September was driven by a decline in manufacturing, which was seen "across most industries", the ONS said.

The ONS publishes its estimate of GDP and does sometimes revise it upwards or downwards. For example, it initially estimated that the economy shrank by 0.3% in August, but later revised that and said it shrank by 0.1%.


Darren Morgan, director of economic statistics at the ONS, said customer-facing industries also "fared badly", with shops hard hit as the squeeze on household budgets meant people were spending less.

According to Mr Morgan, the biggest concerns businesses said they were now facing were the rising price of raw materials and higher energy costs.

He said some firms had taken action to reduce costs by being "far more diligent", switching to more energy-efficient equipment, and changing supplier.

Mr Morgan said the additional bank holiday for Queen Elizabeth II's funeral played a part in the economy's poor performance in September as some businesses closed or had shorter opening times. The economy shrank by 0.6% alone in September.

Rachel Reeves, Labour's shadow chancellor, said the latest economic figures were "another page of failure in the Tories' record on growth".

"Britain's unique exposure to economic shocks has been down to a Conservative-led decade of weak growth, low productivity and underinvestment and widening inequality," she added.

Martin McTague, chairman of the Federation of Small Businesses, called the latest economic figures "dreadful news" for firms that were already under pressure.

"Lower levels of reserves and resources mean they are more vulnerable to downturns, and at a time when confidence is deteriorating in both consumers and businesses, the outlook for the UK economy is now very bleak indeed," he said.

Newsletter

Related Articles

0:00
0:00
Close
Dimon Warns on Fed Independence as Trump Administration Eyes Powell’s Succession
Church of England Removes 1991 Sexuality Guidelines from Clergy Selection
Superman Franchise Achieves Success with Latest Release
Hungary's Viktor Orban Rejects Agreements on Illegal Migration
Jeff Bezos Considers Purchasing Condé Nast as a Wedding Gift
Ghislaine Maxwell Says She’s Ready to Testify Before Congress on Epstein’s Criminal Empire
Bal des Pompiers: A Celebration of Community and Firefighter Culture in France
FBI Chief Kash Patel Denies Resignation Speculations Amid Epstein List Controversy
Air India Pilot’s Mental Health Records Under Scrutiny
Google Secures Windsurf AI Coding Team in $2.4 Billion Licence Deal
Jamie Dimon Warns Europe Is Losing Global Competitiveness and Flags Market Complacency
South African Police Minister Suspended Amid Organised Crime Allegations
Nvidia CEO Claims Chinese Military Reluctance to Use US AI Technology
Hong Kong Advances Digital Asset Strategy to Address Economic Challenges
Australia Rules Out Pre‑commitment of Troops, Reinforces Defence Posture Amid US‑China Tensions
Martha Wells Says Humanity Still Far from True Artificial Intelligence
Nvidia Becomes World’s First Four‑Trillion‑Dollar Company Amid AI Boom
U.S. Resumes Deportations to Third Countries After Supreme Court Ruling
Excavation Begins at Site of Mass Grave for Children at Former Irish Institution
Iranian President Reportedly Injured During Israeli Strike on Secret Facility
EU Delays Retaliatory Tariffs Amid New U.S. Threats on Imports
Trump Defends Attorney General Pam Bondi Amid Epstein Memo Backlash
Renault Shares Drop as CEO Luca de Meo Announces Departure Amid Reports of Move to Kering
Senior Aides for King Charles and Prince Harry Hold Secret Peace Summit
Anti‑Semitism ‘Normalised’ in Middle‑Class Britain, Says Commission Co‑Chair
King Charles Meets David Beckham at Chelsea Flower Show
If the Department is Really About Justice: Ghislaine Maxwell Should Be Freed Now
NYC Candidate Zohran Mamdani’s ‘Antifada’ Remarks Spark National Debate on Political Language and Economic Policy
President Trump Visits Flood-Ravaged Texas, Praises Community Strength and First Responders
From Mystery to Meltdown, Crisis Within the Trump Administration: Epstein Files Ignite A Deepening Rift at the Highest Levels of Government Reveals Chaos, Leaks, and Growing MAGA Backlash
Trump Slams Putin Over War Death Toll, Teases Major Russia Announcement
Reparations argument crushed
Rainmaker CEO Says Cloud Seeding Paused Before Deadly Texas Floods
A 92-year-old woman, who felt she doesn't belong in a nursing home, escaped the death-camp by climbing a gate nearly 8 ft tall
French Journalist Acquitted in Controversial Case Involving Brigitte Macron
Elon Musk’s xAI Targets $200 Billion Valuation in New Fundraising Round
Kraft Heinz Considers Splitting Off Grocery Division Amid Strategic Review
Trump Proposes Supplying Arms to Ukraine Through NATO Allies
EU Proposes New Tax on Large Companies to Boost Budget
Trump Imposes 35% Tariffs on Canadian Imports Amid Trade Tensions
Junior Doctors in the UK Prepare for Five-Day Strike Over Pay Disputes
US Opens First Rare Earth Mine in Over 70 Years in Wyoming
Kurdistan Workers Party Takes Symbolic Step Towards Peace in Northern Iraq
Bitcoin Reaches New Milestone of $116,000
Biden’s Doctor Pleads the Fifth to Avoid Self-Incrimination on President’s Medical Fitness
Grok Chatbot Faces International Backlash for Antisemitic Content
Severe Heatwave Claims 2,300 Lives Across Europe
NVIDIA Achieves Historic Milestone as First Company Valued at $4 Trillion
Declining Beer Consumption Signals Cultural Shift in Germany
Linda Yaccarino Steps Down as CEO of X After Two Years
×