London Daily

Focus on the big picture.
Thursday, Jun 04, 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
Japanese Technology Firm Fujitsu Launches Advanced Artificial Intelligence Tool for Corporate Disclosures
South Africa Officially Launches Nationwide Campaign for Highly Contested Local Government Elections
United Kingdom Commits Additional Funding for Unexploded Ordnance Clearance in Laos
Singapore Announces Stringent New Greenhouse Gas Regulations for Commercial Cooling Systems
Cambodia and Thailand Hold High-Level Border Security Talks at United Nations Headquarters
Myanmar Military Government and China Sign Major Agreement to Upgrade Media and Cultural Cooperation
Knife Attack at Swiss Train Station Leaves Three Injured in Suspected Act of Domestic Terrorism
Transnational Extortion Gang Threatens Canadian Police With Army of One Thousand Armed Operatives
Australia Imposes Forty-Two-Day Quarantine on Cruise Ship Passengers Following Deadly Hantavirus Outbreak
International Monetary Fund Unlocks Seven Hundred Million United States Dollars for Sri Lanka Following Economic Reforms
Australia Launches Record One Point Four Billion Dollar Lawsuit Against Chemical Giant 3M Over Contamination
China and Canada Foreign Ministers Meet in Ottawa in Effort to Stabilize Strained Diplomatic Ties
Indonesia Demands Urgent United Nations Security Council Reform Amid Escalating Global Conflicts
Extreme Weather Patterns Trigger Severe Drought in Madagascar and Destructive Flooding in East Africa
Indian State of Karnataka Faces Political Upheaval as Chief Minister Siddaramaiah Abruptly Resigns
Philippines and Japan Reaffirm Defense Ties as Crucial for Indo-Pacific Regional Stability
Norway Joins French Nuclear Deterrence Initiative in Major Shift for European Security Architecture
Global Critical Mineral Alliances Expand as Western Nations Move to Counter Chinese Supply Dominance
United States Imposes Fifty Percent Tariffs on Mexican Steel and Aluminum Ahead of Trade Pact Review
European Union and China Head Toward Major Trade Conflict Over Clean Technology Exports
United States Economic Growth Severely Downgraded to One Point Six Percent as Stagflation Fears Mount
World Health Organization Warns Central African Ebola Epidemic is Outpacing Containment Efforts
United States Treasury Department Conditions Sanctions Relief on Reopening of the Strait of Hormuz
Iranian Air Defenses Intercept and Destroy United States Military Drone Over Bushehr Province
Iranian Armed Forces Launch Ballistic Missiles Toward Unspecified Targets Prompting Regional Condemnation
United Nations Secretary-General Warns Global Order Facing Highest Level of Conflict Since 1945
Israel Issues Sweeping Evacuation Orders in Southern Lebanon Amid Intensified Hezbollah Conflict
Russia Announces Systemic Military Strikes Targeting Ukrainian Defense and Energy Infrastructure
United States and Iranian Negotiators Reach Draft Agreement to Extend Ceasefire and Resume Nuclear Talks
United Nations Security Council Deeply Divided Over United States Capture of Venezuelan President
US and Iran Exchange Direct Military Strikes Amid Fragile Gulf Ceasefire
World Health Organization Warns of Catastrophic Ebola Outbreak in DR Congo
Russia Threatens New Wave of Strikes on Ukrainian Infrastructure and Embassies
Scientists Warn Atlantic Ocean Currents Could Collapse Faster Than Projected
Anthropic Reaches $900 Billion Valuation in Historic AI Funding Round
Washington Imposes Crippling Sanctions on Iranian Maritime Authority
Japan and the Philippines Initiate Strategic Intelligence-Sharing Pact
Microsoft Deploys Autonomous Computer-Using AI Agents to Global Markets
Anthropic Secures $45 Billion Compute Infrastructure Agreement With SpaceX
U.S. Director of National Intelligence Resigns Amid Administration Shakeup
Micron Technology Crosses Trillion-Dollar Valuation Amid Unprecedented Hardware Demand
Canada and Germany Finalize Historic Long-Term LNG Export Agreement
China Expands International Travel Restrictions on Domestic AI Researchers
Japan Approves Sweeping Overhaul of National Intelligence Apparatus
Global Airlines Scramble Logistics as Middle East Airspace Remains Fractured
Japan's Naphtha Imports Plunge 47 Percent Amid Strait of Hormuz Closure
Global Crude Prices Retreat Below $96 as Gulf Tensions Momentarily Ease
Generative AI Outperforms Human Baselines in Landmark Global Creativity Study
NASA Partners With Private Aerospace to Unveil Permanent Lunar Base Architecture
South Korean Equity Markets Surge on Next-Generation Memory Chip Frenzy
×