London Daily

Focus on the big picture.
Tuesday, Aug 18, 2026

What is a recession and how could it affect me?

What is a recession and how could it affect me?

The UK economy may already be in a recession, the Bank of England has warned.

So what exactly does that mean?

What is a recession?


In normal times, a country's economy grows.

Its citizens, on average, become slightly richer as the value of the goods and services it produces - its Gross Domestic Product (GDP) - increases.

But sometimes their value falls, and a recession is usually defined as when this happens for two three-month periods - or quarters - in a row.

When this happens it's a sign the economy is doing badly.

The last time the UK went into recession was in 2020 at the height of the coronavirus pandemic.

Why does a recession matter?


For most people, economic growth is good.

It usually means there are more jobs, and companies are more profitable and can pay employees and shareholders more.

A growing economy also gives the government more money in taxes. So it can cut taxes, or spend more on benefits, public services and government workers' wages.

When the economy shrinks, all these things go into reverse.

Are we in another recession?


The Bank of England thinks so.

It expects the UK economy to have shrunk 0.1% between July and September (the third quarter). This comes after it shrunk 0.1% between April and June (the second quarter).

It blames that on very sharp increases in prices, especially for energy, with people's incomes falling after adjusting for rising prices.

Inflation (the amount prices are rising) will rise to just under 11% in October, the Bank predicts, up from its already high level above 9%.

What is happening around the world?


Other economies are also struggling, with the International Monetary Fund's latest World Economic Outlook carrying the title "Gloomy and more uncertain".

It highlights downturns in China and Russia, alongside higher-than-expected inflation, especially in the United States and Europe.

This is partly blamed on Russia's war in Ukraine, which has increased energy prices and food prices.

There are also continuing effects from Covid19.

The US and other major economies are also currently struggling


How could a recession affect me?


Some people may lose their jobs, or find it harder to get promotions, or pay rises big enough to allow them to cope with increases in prices.

Graduates and school leavers could find a first job harder to get.

However, the pain of a recession is typically not felt equally across society, and inequality can increase.

Benefit recipients and those with fixed incomes are particularly likely to struggle.

What can be done?


When the economy is struggling to grow at the same time as there is high inflation there is a situation called stagflation, which is very difficult to solve.

Usually, the Bank of England - which is independent of government - would cut interest rates if the country was going into a recession. However, it has just raised them again because prices are rising so fast.

Similarly, there is a debate going on as to whether Prime Minister Liz Truss should cut taxes to stimulate the economy and combat inflation.

How long have recent recessions been?


The recession in 2020 only lasted for six months, although the 19.4% contraction in the UK economy between April and June was the largest on record.

The one before that started in 2008 due to the financial crisis and went on for five quarters.

Newsletter

Related Articles

0:00
0:00
Close
China’s Lifelike AI Humans Move From Livestreams Into Real-World Service Roles
UK Government Rolls Out £5.8 Billion Regional Investment Programme to Revive High Streets
AstraZeneca Ends Late-Stage Lung Cancer Trial After Data Shows No Survival Benefit
London Stocks Fall for Sixth Day as Bond Yields and Middle East Tensions Weigh on Markets
UK Government Rewrites Planning Rules to Accelerate Housing Near Transport Hubs
UK Wildfires Spread Across Southern England as Met Office Issues Severe Heat Warnings
British Doctors Warn Cancer Care Is at Risk as Hospitals Reject More Than a Quarter of Urgent Referrals
UK Hospitals Suspend Critical Care as Extreme Heat Exposes Infrastructure Failures
Sarah Ferguson Reportedly Retreats to Late Ex-Boyfriend's Swiss Chalet
Cristiano Ronaldo and Georgina Rodríguez Sign Prenup Protecting Their Separate Fortunes
Thieves Steal Antonello da Messina Renaissance Masterpieces From Sicilian Museum
Better.com Founder Who Fired 900 Employees on Zoom Is Ousted as CEO
Italian Speed Camera Issues Nearly 32,000 Fines in 10 Weeks, Worth More Than €3 Million
AI Manager at San Francisco Store Recommends Firing Human Employee
Google Launches Pixel 11 With Gemini AI at the Center of Its Hardware Strategy
Campaigners Press Government to Strengthen Rights for Four Million Gig Workers
Government Considers Higher Private Rents to Spread Asylum Accommodation Across UK
UK Moves to Protect Historic Pubs From Conversion Into Housing and Offices
Nigel Farage Wins Clacton By-Election to Return to House of Commons
British Manufacturers Report Rising Cybersecurity Threats Across Industrial Supply Chains
Royal Navy Increases Monitoring of Russian Ships in UK Waters by 25 Percent
England Adds More Than 350 Medical Training Posts to Strengthen NHS Capacity
NHS Waiting Lists Over 52 Weeks Rise by More Than 11,000 Patients
Brent Crude Near $88 Raises Fresh UK Energy Cost Concerns
UK Treasury Warns Prolonged Strait of Hormuz Disruption Could Cut 2027 Growth to 0.3 Percent
UK Economy Grows 0.4 Percent in Second Quarter as Energy and Inflation Risks Persist
UK Heatwave Triggers Emergency Alert as Government Unveils £65 Million Farm Support Package
Reform UK Unveils Plan to Cut Welfare Spending by More Than £50 Billion a Year
Prime Minister Andy Burnham Praised Extinction Rebellion for Doing a 'Great Service'
UK Wildfire Phone Alert Triggers Backlash as Users Switch Off Emergency Warnings
Heathrow Roads Reopen After Burst Water Main Floods Access to Terminals 2 and 3
Former NBA Players Enes Kanter Freedom and Royce White Say They Will Enter 2027 WNBA Draft
Former Cambridge Professor Jason Arday Found Dead Days After Resigning Amid Plagiarism Row
US Appeals Court Rules AI Agent's Website Actions Are Legally Attributed to the User
France's Constitutional Council Blocks Social Media Ban for Children Under 15
Liechtenstein Changes Royal Succession Rules to Allow Women to Inherit the Throne
Women Allege Rape and Sexual Abuse at British Army College for Teenage Recruits
Minnesota: Two independent investigators posed as Muslims (one wearing a burqa) and showed how they could vote in elections without identification.
UK Prime Minister Andy Burnham Takes Regional Tour to Highlight Local Infrastructure and Environmental Problems
Nigel Farage Wins Clacton By-Election to Return to the House of Commons
Bank of England Warns Rising Inflation Could Squeeze UK Household Incomes
UK Government Announces £65 Million Aid Package for Farmers Hit by Severe Drought
UK Economy Grows 0.4% in Second Quarter Despite Energy Market Pressures
UK Issues Emergency Alert as Severe Wildfires Spread Across England and Wales
UK and Finland Discuss European Defence and Continued Support for Ukraine
Nigel Farage Wins Clacton By-Election to Return to the House of Commons
UK Government Deploys Military to Help Fight Wildfires and Bans Disposable Barbecues
UK Records Hottest Day of the Year as Fifth Summer Heatwave Peaks in Southern England
UK Condemns Houthi Actions and Warns of Red Sea Threat to Global Trade
UK and Solomon Islands Open Wildlife Photography Exhibition in Honiara
×