London Daily

Focus on the big picture.
Friday, Jan 09, 2026

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 Prime Minister Starmer Reaffirms Support for Danish Sovereignty Over Greenland Amid U.S. Pressure
UK Support Bolsters U.S. Seizure of Russian-Flagged Tanker Marinera in Atlantic Strike on Sanctions Evasion
The Claim That Maduro’s Capture and Trial Violate International Law Is Either Legally Illiterate—or Deliberately Deceptive
UK Data Watchdog Probes Elon Musk’s X Over AI-Generated Grok Images Amid Surge in Non-Consensual Outputs
Prince Harry to Return to UK for Court Hearing Without Plans to Meet King Charles III
UK Confirms Support for US Seizure of Russian-Flagged Oil Tanker in North Atlantic
Béla Tarr, Visionary Hungarian Filmmaker, Dies at Seventy After Long Illness
UK and France Pledge Military Hubs Across Ukraine in Post-Ceasefire Security Plan
Prince Harry Poised to Regain UK Security Cover, Clearing Way for Family Visits
UK Junk Food Advertising Ban Faces Major Loophole Allowing Brand-Only Promotions
Maduro’s Arrest Without The Hague Tests International Law—and Trump’s Willingness to Break It
German Intelligence Secretly Intercepted Obama’s Air Force One Communications
The U.S. State Department’s account in Persian: “President Trump is a man of action. If you didn’t know it until now, now you do—do not play games with President Trump.”
Fake Mainstream Media Double Standard: Elon Musk Versus Mamdani
HSBC Leads 2026 Mortgage Rate Cuts as UK Lending Costs Ease
US Joint Chiefs Chairman Outlines How Operation Absolute Resolve Was Carried Out in Venezuela
Starmer Welcomes End of Maduro Era While Stressing International Law and UK Non-Involvement
Korean Beauty Turns Viral Skincare Into a Global Export Engine
UK Confirms Non-Involvement in U.S. Military Action Against Venezuela
UK Terror Watchdog Calls for Australian-Style Social Media Ban to Protect Teenagers
Iranian Protests Intensify as Another Revolutionary Guard Member Is Killed and Khamenei Blames the West
Delta Force Identified as Unit Behind U.S. Operation That Captured Venezuela’s President
Europe’s Luxury Sanctions Punish Russian Consumers While a Sanctions-Circumvention Industry Thrives
Berkshire’s Buffett-to-Abel Transition Tests Whether a One-Man Trust Model Can Survive as a System
Fraud in European Central Bank: Lagarde’s Hidden Pay Premium Exposes a Transparency Crisis at the European Central Bank
Trump Announces U.S. Large-Scale Strike on Venezuela, Declares President Maduro and Wife Captured
Tesla Loses EV Crown to China’s BYD After Annual Deliveries Decline in 2025
UK Manufacturing Growth Reaches 15-Month Peak as Output and Orders Improve in December
Beijing Threatened to Scrap UK–China Trade Talks After British Minister’s Taiwan Visit
Newly Released Files Reveal Tony Blair Pressured Officials Over Iraq Death Case Involving UK Soldiers
Top Stocks and Themes to Watch in 2026 as Markets Enter New Year with Fresh Momentum
No UK Curfew Ordered as Deepfake TikTok Falsely Attributes Decree to Prime Minister Starmer
Europe’s Largest Defence Groups Set to Return Nearly Five Billion Dollars to Shareholders in Twenty Twenty-Five
Abu Dhabi ‘Capital of Capital’: How Abu Dhabi Rose as a Sovereign Wealth Power
Diamonds Are Powering a New Quantum Revolution
Trump Threatens Strikes Against Iran if Nuclear Programme Is Restarted
Apple Escalates Legal Fight by Appealing £1.5 Billion UK Ruling Over App Store Fees
UK Debt Levels Sit Mid-Range Among Advanced Economies Despite Rising Pressures
UK Plans Royal Diplomacy with King Charles and Prince William to Reinvigorate Trade Talks with US
King Charles and Prince William Poised for Separate 2026 US Visits to Reinforce UK-US Trade and Diplomatic Ties
Apple Moves to Appeal UK Ruling Ordering £1.5 Billion in Customer Overcharge Damages
King Charles’s 2025 Christmas Message Tops UK Television Ratings on Christmas Day
The Battle Over the Internet Explodes: The United States Bars European Officials and Ignites a Diplomatic Crisis
Princesses Beatrice and Eugenie Join Royal Family at Sandringham Christmas Service
Fine Wine Investors Find Little Cheer in Third Year of Falls
UK Mortgage Rates Edge Lower as Bank of England Base Rate Cut Filters Through Lending Market
U.S. Supermarket Gives Customers Free Groceries for Christmas After Computer Glitch
Air India ‘Finds’ a Plane That Vanished 13 Years Ago
Caviar and Foie Gras? China Is Becoming a Luxury Food Powerhouse
Hong Kong Climbs to Second Globally in 2025 Tourism Rankings Behind Bangkok
×