London Daily

Focus on the big picture.
Monday, Oct 06, 2025

The UK economy is heading back into recession

The UK economy is heading back into recession

The Bank of England is pumping another £150 billion ($195 billion) into the UK economy after warning of a double-dip recession because of the coronavirus pandemic and an uncertain outlook because of Brexit.
The UK central bank said on Thursday that it would keep interest rates unchanged at a record low of 0.1% but would increase its purchases of UK government bonds to £875 billion ($1.1 trillion).

Restrictions introduced to tackle a rapid rise in Covid-19 cases would weigh on consumer spending to a greater extent than the bank projected in August, "leading to a decline in GDP" in the fourth quarter of this year, it added.

England re-entered a national lockdown on Thursday, with restaurants, bars and non-essential businesses closed until December 2. The United Kingdom reported its second-largest daily increase in Covid-19 cases on Wednesday with 25,177 new infections recorded in 24 hours.

In a bid to soften the blow to households and businesses, UK finance minister Rishi Sunak on Thursday announced that the British government would extend its furlough program through March 2021. The government will pay 80% of the wages of employees of businesses forced to close, capped at £2,500 ($3,270) per month.

The lockdown and unresolved talks on a post-Brexit trade deal with the European Union left the outlook for the UK economy looking "unusually uncertain," the Bank of England said. Without an EU deal, UK-based companies face hefty tariffs, quotas and other barriers to doing business with the country's biggest export market from January 1.

"It depends on the evolution of the pandemic and measures taken to protect public health, as well as the nature of, and transition to, the new trading arrangements between the European Union and the United Kingdom. It also depends on the responses of households, businesses and financial markets to these developments."

The central bank expects the economy to shrink by 2% in the fourth quarter, and by 11% in 2020.

Over the longer run, scarring caused by the pandemic will reduce the country's economic output by roughly 1.75%. GDP is not expected to exceed the level it reached at the end of 2019 until the first quarter of 2022.

A survey of business activity published Wednesday showed the increase in private sector activity last month was the weakest since June, with new orders declining and employment dropping.

"November's lockdown in England and a worsening Covid-19 situation across the rest of Europe means that the UK economy seems on course for a double-dip recession this winter and a far more challenging path to recovery in 2021," said Tim Moore, economics director at IHS Markit, which compiled the survey.

The UK economy is expected to have rebounded strongly in the third quarter after suffering the biggest GDP fall of any major economy in the second. It also shrank by 2.5% in the first three months of 2020.
Newsletter

Related Articles

0:00
0:00
Close
Three Scientists Awarded Nobel Prize in Medicine for Discovery of Immune Self-Tolerance Mechanism
OpenAI and AMD Forge Landmark AI-Chip Alliance with Equity Option
Munich Airport Reopens After Second Drone Shutdown
France Names New Government Amid Political Crisis
Trump Stands Firm in Shutdown Showdown and Declares War on Drug Cartels — Turning Crisis into Opportunity
Surge of U.S. Billionaires Transforms London’s Peninsula Apartments into Ultra-Luxury Stronghold
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Jeff Bezos Calls AI Surge a ‘Good’ Bubble, Urges Focus on Lasting Innovation
Japan’s Ruling Party Chooses Sanae Takaichi, Clearing Path to First Female Prime Minister
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Taylor Swift’s ‘Showgirl’ Launch Extends Billion-Dollar Empire
Trump Administration Launches “TrumpRx” Plan to Enable Direct Drug Sales at Deep Discounts
Trump Announces Intention to Impose 100 Percent Tariff on Foreign-Made Films
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Singapore and Hong Kong Vie to Dominate Asia’s Rising Gold Trade
Trump Organization Teams with Saudi Developer on $1 Billion Trump Plaza in Jeddah
Manhattan Sees Surge in Office-to-Housing Conversions, Highest Since 2008
Switzerland and U.S. Issue Joint Assurance Against Currency Manipulation
Electronic Arts to Be Taken Private in Historic $55 Billion Buyout
Thomas Jacob Sanford Named as Suspect in Deadly Michigan Church Shooting and Arson
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
New York Man Arrested After On-Air Confession to 2017 Parents’ Murders
U.S. Defense Chief Orders Sudden Summit of Hundreds of Generals and Admirals
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
Trump Claims FBI Planted 274 Agents at Capitol Riot, Citing Unverified Reports
India: Internet Suspended in Bareilly Amid Communal Clashes Between Muslims and Hindus
Supreme Court Extends Freeze on Nearly $5 Billion in U.S. Foreign Aid at Trump’s Request
Archaeologists Recover Statues and Temples from 2,000-Year-Old Sunken City off Alexandria
China Deploys 2,000 Workers to Spain to Build Major EV Battery Factory, Raising European Dependence
Speed Takes Over: How Drive-Through Coffee Chains Are Rewriting U.S. Coffee Culture
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Ringo Starr Champions Enduring Beatles Legacy While Debuting Las Vegas Art Show
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Colombian President Petro Vows to Mobilize Volunteers for Gaza and Joins List of Fighters
FBI Removes Agents Who Kneeled at 2020 Protest, Citing Breach of Professional Conduct
Trump Alleges ‘Triple Sabotage’ at United Nations After Escalator and Teleprompter Failures
Shock in France: 5 Years in Prison for Former President Nicolas Sarkozy
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
BNP Paribas Abandons Ban on 'Controversial Weapons' Financing Amid Europe’s Defence Push
Typhoon Ragasa Leaves Trail of Destruction Across East Asia Before Making Landfall in China
The Personality Rights Challenge in India’s AI Era
Big Banks Rebuild in Hong Kong as Deal Volume Surges
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Arnault Denounces Proposed Wealth Tax as Threat to French Economy
Study Finds No Safe Level of Alcohol for Dementia Risk
Denmark Investigates Drone Incursion, Does Not Rule Out Russian Involvement
Lilly CEO Warns UK Is ‘Worst Country in Europe’ for Drug Prices, Pulls Back Investment
Nigel Farage Emerges as Central Force in British Politics with Reform UK Surge
×