London Daily

Focus on the big picture.
Friday, Mar 27, 2026

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
Jaguar Land Rover Halts Production at UK Plant Amid Supplier Disruption
UK Police Reverse Position, Confirm Arrests Will Resume for Palestine Action Protests
UK Small Businesses Face Europe’s Steepest Cost Pressures, New Survey Reveals
US Envoy Urges UK to Proceed with King’s Visit Amid Diplomatic Sensitivities
FTSE 100 Drops Over One Percent as Middle East Tensions Weigh on Markets
UK CO2 Plant Set to Reopen as Authorities Move to Safeguard Supplies Amid Middle East Tensions
Trump Urges Stronger Defence Investment as He Questions Allied Naval Capabilities
New COVID Variant Detected in UK Raises Concerns Over Vaccine Effectiveness
FTSE Russell Moves to Standardise Free-Float Rules for UK and International Listings
HBO Max Launches in UK and Ireland, Marking Major Step in Global Streaming Expansion
UK Signals Readiness to Seize Russian ‘Shadow Fleet’ Vessels in Escalation of Sanctions Enforcement
Escalating Middle East Conflict Seen as Major Threat to UK Economic Stability
Early Challenges Mark Prince Harry and Meghan’s Australia Visit
UK Government Rejects Cover-Up Claims After Theft of Former PM Aide’s Phone
Cyprus Opens Strategic Talks with UK Over Sovereign Base Areas
UK Faces Risk of Sharp Inflation Surge Despite Stable Pre-Crisis Figures
UK Police Arrest Two Over Suspected Antisemitic Arson as Iran Link Investigated
UK Inflation Holds at Three Percent Ahead of Oil Price Shock from Iran Conflict
UK Fuel Prices Face Upward Pressure as Global Oil Trends Raise Cost Outlook
Girlguiding UK Sets September Deadline for Membership Policy Change Affecting Trans Participants
Germany and UK Accelerate Wind Power Expansion to Strengthen Energy Security
UK Moves to Ban Cryptocurrency Donations to Political Parties Over Foreign Influence Concerns
UK and Turkey Finalise Major Air Defence Agreement Worth Billions
Apple Introduces Mandatory Age Verification for iPhone Users in the UK
Diverging Views Emerge Over Meghan Markle’s Planned Australia Appearance
Trump Signals Frustration with UK Leadership Amid Diverging Approaches to Iran Conflict
UK Government Takes Control of Hunterston B as Landmark Nuclear Decommissioning Begins
UK Public Inflation Expectations Jump Sharply in March, Raising Pressure on Bank of England
UK Ministers Warn Expanded North Sea Drilling Would Deepen Exposure to Global Energy Volatility
Delayed UK Defence Investment Plan Leaves Suppliers Under Severe Financial Strain
Can Iran Strike the UK? Assessing the Real Military Threat as Conflict Escalates
Sanctioned Iranian Banker Linked to Luxury Marbella Villa Through UK Corporate Structure
Casey Bloys Navigates HBO Max UK Launch, Paramount Integration and Industry Buzz Over Netflix Meeting
Iran Conflict Sparks Sharp Turbulence in UK Mortgage Market, Reaching Pandemic-Era Disruption Levels
Major Donor Urges University of Kentucky to Reconsider Mitch Barnhart’s Post-Retirement Role
United Kingdom Moves to Lead International Effort to Reopen Strait of Hormuz
UK Police Investigate Targeted Attack on Jewish Ambulance Vehicles
UK Police Investigate Targeted Attack on Jewish Ambulance Vehicles
Senior UK Advocate Criticises Barnhart Retirement Appointment, Calls for Reconsideration
UK Finds No Evidence of Direct Iranian Threat to Britain, Says Prime Minister Starmer
Assessing Iran’s Strike Capability and the UK’s Readiness Amid Rising Tensions
NATO Unable to Confirm Iran’s Role in Strike on UK-US Base as Tehran Denies Involvement
University of Kentucky’s Youling Xiong Receives SEC Faculty Achievement Award for 2026
Trump Highlights Satirical Portrayal of UK Leadership Amid Talks with Prime Minister Starmer on Iran Conflict
Trump Highlights Satirical Portrayal of UK Leadership Amid Talks with Prime Minister Starmer on Iran Conflict
UK Fuel Prices Surge Toward Crisis Levels as Experts Warn of Further Sharp Increases
UK Fuel Prices Surge Toward Crisis Levels as Experts Warn of Further Sharp Increases
Duchess of Sussex Secures ‘As Ever’ Trademark Rights in Australia Ahead of High-Profile Visit
UK Reaffirms Security as Officials Reject Claims of Immediate Iranian Missile Threat
Rising Middle East Tensions Spark ‘Trumpflation’ Debate Over Impact on UK Households
×