London Daily

Focus on the big picture.
Tuesday, May 13, 2025

The UK has one foot in a recession but it's worth being wary of forecasts during uncertain times

The UK has one foot in a recession but it's worth being wary of forecasts during uncertain times

GPD has shrunk days before the chancellor is expected to address an "eyewatering" gap in the public finances, suggesting there could be worse to come. However, the fact it is unclear what will happen in Ukraine is just one reason why people should hold their judgement.

The UK now officially has one foot in a recession.

That might on the face of it sound like a statement of the obvious. After all, for many households up and down the country it has felt pretty tough for quite some time.

That the Office for National Statistics (ONS) is now saying that gross domestic product (GDP) shrank by 0.2% in the third quarter of the year might feel neither here nor there. And the definition of a recession is also frankly somewhat arbitrary: we will only "formally" be in recession according to that definition if GDP also shrinks in the final three months of the year.

Even so, these numbers are worth paying attention to for a few reasons. The first is that GDP is the most comprehensive measure of how we're all doing. It has plenty of flaws, but as economic numbers go, they don't get much more important. For GDP shows how much money and activity we're generating across the country. And when it falls it means we're all a bit worse off.

And the concern is that pretty much every major forecaster thinks this is just the beginning of it. The Bank of England's forecasts assume a further seven quarters of contraction - though it's worth saying there are some very big provisos around this number. And then when you bear in mind that this all comes before the widely expected cuts and tax rises the chancellor is expected to introduce next week to address what he today called an "eyewatering" gap in the public finances, it's clear there could be worse to come.

That being said, here are a couple of reasons to hold your judgement. The first is that we really have no conception of what is going to happen in Ukraine in the coming months. The energy price shock is not the only factor in the economy right now, but it is a large part of it. If things go better than expected in Ukraine that could help keep energy prices down, which in turn would lessen the cost of living squeeze. But the converse is also true: if things deteriorate then the squeeze could worsen.



Second, the numbers today were, in one respect at least, a little better than expected. Economists had been pencilling in a 0.5 per cent fall in GDP in the third quarter, so a 0.2 per cent fall is considerably less bad. Moreover a chunk of that deterioration was down to the extra bank holiday due to the Queen's funeral. Adjust for that and the economy was perhaps "only" flatlining. And it's quite possible this fall gets revised in coming months.

That being said, nearly every other economic metric is pointing towards a period of weakness, if not recession, in the coming years. But it's worth being very wary indeed of any forecasts telling you quite how long and quite how deep. We are living in particularly uncertain times.

Newsletter

Related Articles

0:00
0:00
Close
Poland Tightens Immigration Policy with New Plan to Suspend Asylum Law
Trump says it would be 'stupid' not to accept gift of Qatari plane
8-Year-Old Orders 70,000 Lollipops Using Mother’s Phone, Prompting $4,200 Amazon Bill and Viral Facebook Plea
Quantum Computing Threatens Bitcoin Security
American citizens account for 70% of worldwide pharmaceutical sales despite comprising only 4% of global population
New Details Emerge on Syrian Attacker's Motives in German Festival Stabbing
UK Introduces New Immigration Policy to Reduce Net Migration
Brazil’s President Aims to Strengthen Ties with China Amid US Trade Tensions
Senate Democrats Move to Censure Trump Over Qatar Jet Gift
First White South Africans Resettled in the U.S. Amid Controversy Over Persecution Claims
Hamas Releases Last Living US Hostage from Gaza Amid Ongoing Conflict
India and Pakistan Agreement on Ceasefire Amid Ongoing Tensions
Arsenal Stages Comeback to Draw 2-2 Against Liverpool in Premier League Clash
Trump's Upcoming Visit to Gulf Nations: Investment and Security at the Forefront
Rodrigo Duterte Awaits Trial at The Hague. Next week he might be elected mayor of his hometown
Trump fires director of U.S. Copyright Office, sources say
Retired British police officer arrested over ‘thought crime’ tweet
Cardinal Robert Prevost Elected as Pope Leo XIV, Marking a Historic Papacy
Newark Mayor Ras Baraka Arrested at ICE Facility Amid Congressional Visit
India-Pakistan conflict may be first test for Chinese military tech
Bill Gates Announces Plan to Wind Down Philanthropic Foundation and Disperse Wealth
Historic Papal Conclave Set to Commence in Rome
Huge Copper, Gold, and Silver Discovery in Argentina and Chile — But the Profits Go Abroad
Prince Harry is pleading for reconciliation — but the royals are just as sick of his victimhood as everyone else
The Road to Freedom: She Protested Putin, Escaped House Arrest, and Survived a 2,800-Kilometer Journey
OpenAI's Flip-Flop: No Longer Going Commercial, Back to Nonprofit, After Musk Lawsuit and Backlash
“Trump Supporter” Aims to Bring a MAGA-Style Shift to Romania
First From China: Zhao Xintong Wins the Snooker World Championship
Nvidia Faces Billion-Dollar Losses – Warns: China Is on Its Way to Becoming an AI Superpower
Trump Rules Out Third Term, Names JD Vance and Marco Rubio as Potential Successors
Mexico Says ‘No’ to U.S. Troops: President Sheinbaum Rejects Trump’s Offer to Fight Cartels
Nigel Farage’s Reform UK Storms the Map, Wrecking the Two-Party Monopoly
DOGE: Reimagining Government Operations with AI
Common Sense Returns to Britain's Legal System: UK Supreme Court Declares a Woman Is… a Woman
Beijing Says U.S. Is ‘Reaching Out’ for Tariff Talks Amid Soaring Trade Tensions
U.K. Court Rejects Prince Harry’s Final Appeal Over Police Security
Prince Harry’s Heartfelt Outburst Rocks the Royal Family
Trump Shares AI-Generated Image of Himself as… Pope, Prompting Outrage Reaction
Transgender Swimmer Secures Five Gold Medals at U.S. Masters Championship
Prince Harry: “I Want Reconciliation with My Family”
Germany's Alternative für Deutschland (AfD) party has now been officially labeled “right-wing extremist” by the federal office for the so-called “protection of the constitution.”
Amazon Launches Satellite Internet Service Amidst Competition with SpaceX
Transformative Changes in Women's Wrestling: The Rise of WWE Superstars
The Rush to the White Gold: Global Investment Surge in Natural Hydrogen Exploration
This is a day in Spain without electricity and internet
Reform UK Surprises in British Elections, Challenging Traditional Two-Party System
180-Year-Old Christian University in South Carolina Announces Closure Due to Unmet $6 Million Fundraising Goal
Brazilian Woman Jailed for Fourteen Years for Writing “You Lost, Idiot” on Statue During Protest
Trump Administration Removes National Security Adviser Mike Waltz Amid Signal Chat Controversy
Dutch Politician Eva Vlaardingerbroek Receives Spyware Threat Alert from Apple
×