London Daily

Focus on the big picture.
Monday, Sep 01, 2025

UK heading for recession, former chancellor Lord Hammond warns

UK heading for recession, former chancellor Lord Hammond warns

Lord Hammond told Sky News the UK economy will slow down quite sharply in the autumn, but said it is "probably a good thing".
The UK is heading for a recession, Lord Hammond has warned, saying "all the data points that way".

The former chancellor told Sky News the country faces a "very, very difficult period ahead in the short term".

He said he thinks the UK economy will slow down quite sharply in the autumn.

Lord Hammond said it was the "next part of the cycle that began with the COVID pandemic" when an "enormous government response" was delivered.

"To think that we can somehow move on from that, leave the tab on the table and act as if nothing had happened is unrealistic, is naive," he said.

"There's now got to be a part of the cycle where we correct for the extraordinary action that was taken during the pandemic.

"And a lot of what we're seeing at the moment in terms of inflation pressures in the domestic economy is a result of the people having saved quite a lot during the lockdown period and that saving getting released into the economy over the last six months."

He said that although the war in Ukraine is one of the drivers of inflation, the issue began long before the conflict, fuelled by COVID stimulus packages provided by the UK, US and other countries.

He said Brexit has also had an impact on soaring prices because it led to changes in supply chains.

"As we come out of the COVID crisis, supply and demand are out of kilter," he said.

He said there are many parts of the economy that are "still not back working back to normal yet" so there is "bound to be an effect there".

Asked if the government should increase spending or cut taxes, he said people are "looking for instant and pain-free solutions".

"During the period of the COVID crisis, they were invited to believe that the government could always deliver instant and pain-free solutions," he said.

"But you can't solve an inflation problem by injecting more liquidity into the economy - that is pouring fuel on the fire.

"And unfortunately, the issue in front of us at the moment is not about the short-term pain of inflation at 10%. We're having to live with that.

"The issue is whether we can now manage inflation down over the next year or so, to get back to something like normal."

He said the government "can't compensate people for all of the inflationary pressure" because short-term relief would lead to longer-term inflation.

Lord Hammond said an economic slowdown in the autumn is "probably a good thing".

He said he knows "people won't see it that way" but by "squeezing out the simulation before it becomes embedded, we stand a real chance of bouncing back next year in much better shape".

He expressed support for the Bank of England's decisions to raise the interest rate in the last few months.
Newsletter

Related Articles

0:00
0:00
Close
WhatsApp is rolling out a feature that looks a lot like Telegram.
Investigations Reveal Rise in ‘Sex-for-Rent’ Listings Across Canada Exploiting Vulnerable Tenants
Chinese and Indian Leaders Pursue Amity Amid Global Shifts
European Union Plans for Ukraine Deployment
ECB Warns Against Inflation Complacency
Concerns Over North Cyprus Casino Development
Shipping Companies Look Beyond Chinese Finance
Rural Exodus Fueling European Wildfires
China Hosts Major Security Meeting
Chinese Police Successfully Recover Family's Savings from Livestream Purchases
Germany Marks a Decade Since Migrant Wave with Divisions, Success Stories, and Political Shifts
Liverpool Defeat Arsenal 1–0 with Szoboszlai Free-Kick to Stay Top of Premier League
Prince Harry and King Charles to Meet in First Reunion After 20 Months
Chinese Stock Market Rally Fueled by Domestic Investors
Israeli Airstrike in Yemen Kills Houthi Prime Minister
Ukrainian Nationalist Politician Andriy Parubiy Assassinated in Lviv
Corporate America Cuts Middle Management as Bosses Take On Triple the Workload
Parents Sue OpenAI After Teen’s Death, Alleging ChatGPT Encouraged Suicide
Amazon Faces Lawsuit Over 'Buy' Label on Digital Streaming Content
Federal Reserve Independence Questioned Amid Trump’s Push to Reshape Central Bank
British Politics Faces Tumultuous Autumn After Summer of Rebellions and Rising Farage Momentum
US Appeals Court Rules Against Most Trump-Era Tariffs
UK Sought Broad Access to Apple Users’ Data, Court Filing Reveals
UK Bank Shares Dive Over Potential Tax on Sector
Germany’s Auto Industry Sheds 51,500 Jobs in First Half of 2025 Amid Deepening Crisis
Bruce Willis Relocated Due to Advanced Dementia
French and Korean Nuclear Majors Clash As EU Launches Foreign Subsidy Probe
EU Stands Firm on Digital Rules as Trump Warns of Retaliation
Getting Ready for the 3rd Time in Its History, Germany Approves Voluntary Military Service for Teenagers
Argentine President Javier Milei Evacuated After Stones Thrown During Campaign Event
Denmark Confronts U.S. Diplomat Over Covert Trump-Linked Influence in Greenland
Starmer Should Back Away from ECHR, Says Jack Straw
Trump Demands RICO Charges Against George Soros and Son for Funding Violent Protests
Taylor Swift Announces Engagement to NFL Star Travis Kelce
France May Need IMF Bailout, Warns Finance Minister
Chinese AI Chipmaker Cambricon Posts Record Profit as Beijing Pushes Pivot from Nvidia
After the Shock of Defeat, Iranians Yearn for Change
Ukraine Finally Allows Young Men Aged Eighteen to Twenty-Two to Leave the Country
The Porn Remains, Privacy Disappears: How Britain Broke the Internet in Ten Days
YouTube Altered Content by Artificial Intelligence – Without Permission
Welcome to The Definition of Insanity: Germany Edition
Just a reminder, this is Michael Jackson's daughter, Paris.
Spotify’s Strange Move: The Feature Nobody Asked For – Returns
Manhunt in Australia: Armed Anti-Government Suspect Kills Police Officers Sent to Arrest Him
China Launches World’s Most Powerful Neutrino Detector
How Beijing-Linked Networks Shape Elections in New York City
Ukrainian Refugee Iryna Zarutska Fled War To US, Stabbed To Death
Elon Musk Sues Apple and OpenAI Over Alleged App Store Monopoly
2 Australian Police Shot Dead In Encounter In Rural Victoria State
Vietnam Evacuates Hundreds of Thousands as Typhoon Kajiki Strikes; China’s Sanya Shuts Down
×