London Daily

Focus on the big picture.
Thursday, Oct 30, 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
UK and Vietnam Sign Landmark Migration Deal to Fast-Track Returns of Irregular Arrivals
UK Drug-Pricing Overhaul Essential for Life-Sciences Ambition, Says GSK Chief
Princesses Beatrice and Eugenie Temporarily Leave the UK Amid Their Parents’ Royal Fallout
UK Weighs Early End to Oil and Gas Windfall Tax as Reeves Seeks Investment Commitments
UK Retail Inflation Slows as Shop Prices Fall for First Time Since Spring
Next Raises Full-Year Profit Guidance After Strong Third-Quarter Performance
Reform UK’s Lee Anderson Admits to 'Gaming' Benefits System While Advocating Crackdown
United States and South Korea Conclude Major Trade Accord Worth $350 Billion
Hurricane Melissa Strikes Cuba After Devastating Jamaica With Record Winds
Vice President Vance to Headline Turning Point USA Campus Event at Ole Miss
U.S. Targets Maritime Narco-Routes While Border Pressure to Mexico Remains Limited
Bill Gates at 70: “I Have a Real Fear of Artificial Intelligence – and Also Regret”
Elon Musk Unveils Grokipedia: An AI-Driven Alternative to Wikipedia
Saudi Arabia Unveils Vision for First-Ever "Sky Stadium" Suspended Over Desert Floor
Amazon Announces 14 000 Corporate Job Cuts as AI Investment Accelerates
UK Shop Prices Fall for First Time Since March, Food Leads the Decline
London Stock Exchange Group ADR (LNSTY) Earns Zacks Rank #1 Upgrade on Rising Earnings Outlook
Soap legend Tony Adams, long-time star of Crossroads, dies at 84
Rachel Reeves Signals Tax Increases Ahead of November Budget Amid £20-50 Billion Fiscal Gap
NatWest Past Gains of 314% Spotlight Opportunity — But Some Key Risks Remain
UK Launches ‘Golden Age’ of Nuclear with £38 Billion Sizewell C Approval
UK Announces £1.08 Billion Budget for Offshore Wind Auction to Boost 2030 Capacity
UK Seeks Steel Alliance with EU and US to Counter China’s Over-Capacity
UK Struggles to Balance China as Both Strategic Threat and Valued Trading Partner
Argentina’s Markets Surge as Milei’s Party Secures Major Win
British Journalist Sami Hamdi Detained by U.S. Authorities After Visa Revocation Amid Israel-Gaza Commentary
King Charles Unveils UK’s First LGBT+ Armed Forces Memorial at National Memorial Arboretum
At ninety-two and re-elected: Paul Biya secures eighth term in Cameroon amid unrest
Racist Incidents Against UK Nurses Surge by 55%
UK Chancellor Rachel Reeves Cites Shared Concerns With Trump Administration as Foundation for Early US-UK Trade Deal
Essentra plc: A Closer Look at a UK ‘Penny Stock’ Opportunity Amid Market Weakness
U.S. and China Near Deal to Avert Rare-Earth Export Controls Ahead of Trump-Xi Summit
Justin time: Justin Herbert Shields Madison Beer with Impressive Reflex at Lakers Game
Russia’s President Putin Declares Burevestnik Nuclear Cruise Missile Ready for Deployment
Giuffre’s Memoir Alleges Maxwell Claimed Sexual Act with Clooney
House Republicans Move to Strip NYC Mayoral Front-Runner Zohran Mamdani of U.S. Citizenship
Record-High Spoiled Ballots Signal Voter Discontent in Ireland’s 2025 Presidential Election
Philippines’ Taal Volcano Erupts Overnight with 2.4 km Ash Plume
Albania’s Virtual AI 'Minister' Diella Set to 'Birth' Eighty-Three Digital Assistants for MPs
Tesla Unveils Vision for Optimus V3 as ‘Biggest Product of All Time’, Including Surgical Capabilities
Francis Ford Coppola Auctions Luxury Watches After Self-Financed Film Flop
Convicted Sex Offender Mistakenly Freed by UK Prison Service Arrested in London
United States and China Begin Constructive Trade Negotiations Ahead of Trump–Xi Summit
U.S. Treasury Sanctions Colombia’s President Gustavo Petro over Drug-Trafficking Allegations
Miss USA Crowns Nebraska’s Audrey Eckert Amid Leadership Overhaul
‘I Am Not Done’: Kamala Harris Signals Possible 2028 White House Run
NBA Faces Integrity Crisis After Mass Arrests in Gambling Scandal
Swift Heist at the Louvre Sees Eight French Crown Jewels Stolen in Under Seven Minutes
U.S. Halts Trade Talks with Canada After Ontario Ad Using Reagan Voice Triggers Diplomatic Fallout
Microsoft AI CEO: ‘We’re making an AI that you can trust your kids to use’ — but can Microsoft rebuild its own trust before fixing the industry’s?
×