London Daily

Focus on the big picture.
Saturday, Jun 27, 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
London Ambulance Service Sees Record Emergency Demand as Heatwave Intensifies
British Chambers of Commerce Warns of Prolonged Weak Investment Climate Through 2027
Bank of England Holds Interest Rates as Inflation Risks Persist
UK Construction Sector Faces One Percent Contraction Amid Cost and Investment Pressures
Former DUP Leader Sir Jeffrey Donaldson Convicted of Sexual Offences
Church of England Appoints Dr Linsay Cunningham to Lead Faith and Public Life Division
UK Armed Forces Day Marked Nationwide With Events From Aberdeen to the Scilly Isles
Rising Tensions in Edinburgh Prompt Joint Warning From Scottish Local Government Leaders
UK Construction Sector Forecast to Contract One Percent in 2026 on Cost Pressures
UK Parliament Backs 87 Percent Emissions Cut as Government Deepens Electrification Drive
British Chambers of Commerce Forecast Weak UK Growth as Investment and Demand Slow
Bank of England Holds Interest Rates at 3.75 Percent Amid Energy and Inflation Uncertainty
London Ambulance Service Reports Record Surge in Life-Threatening Emergency Calls During Heatwave
UK Parliament Approves Legally Binding 87 Percent Emissions Cut Target by 2040
United Kingdom Records Third Consecutive Day of Record June Heat as Europe Faces Worsening Heatwave
Robert Jenrick Defends £5 Million Donation to Nigel Farage Amid Political Scrutiny
Plymouth Museum The Box Wins 2026 Art Fund Museum of the Year Award
UK Government Faces Backlash Over Plans to Use Former Military Sites for Asylum Accommodation
Labour Party Faces Pressure Over Cabinet Stability as Senior Figures Clash on Policy Direction
Heathrow Airport Forecasts Passenger Decline in 2026 as Costs and Climate Disruption Mount
UK Energy Regulator Approves Expansion of Long-Duration Storage to Boost Power System Resilience
Crown Estate Reports Third Consecutive Year of £1 Billion Profit as Debate Over Royal Finances Intensifies
Teenager Charged With Murder in Wales Following Death of 14-Year-Old Boy
Nottingham University Hospitals Maternity Failures Trigger Calls for Public Inquiry Into Patient Safety
EasyJet Rejects £4.9 Billion Takeover Offer From Castlelake but Keeps Door Open for Further Talks
Record Heatwave Triggers UK Transport and Infrastructure Strain as Heathrow Revises Passenger Forecast Downward
Ofgem Approves Sixteen Long-Duration Energy Storage Projects to Strengthen UK Grid Stability
Labour Government Faces Internal Tensions Over Cabinet Decisions and Net Zero Policy Direction
British Food and Drink Exports Fall to Decade Low Amid Trade Friction and US Tariffs
Great Britain Grid Operator Spends £10 Million to Stabilize Electricity Supply During Heatwave Demand Surge
UK Parliament Committee Calls for Urgent National Adaptation Strategy as Extreme Heat Strains Public Infrastructure
Record-Breaking Heatwave Pushes England’s National Health Service to Critical Incident Status as Hospitals Struggle With Surge in Emergencies
UK Government Launches Review of Voluntary National Insurance Contributions System
UK Planning Inspectorate Reports Key Infrastructure and Planning Milestones in Annual Review
UK Government Reviews Travel Expense Reimbursement Rates for Employers and Employees
Civil Nuclear Constabulary Launches National Digital Memorial for Officers Killed in Service
UK and US Expand Collaboration on Nuclear Fusion Research and Workforce Exchange
Environment Agency Secures £275,000 Enforcement Deal with Anglian Water Over Permit Breaches
Independent Inspector Flags Ongoing Failures in UK Home Office Border Case Management
UK Government Considers Zero VAT Rate on Land for Social Housing Development
Bank of England Reports Sharp Drop in Emissions and Warns on Climate-Driven Financial Risk
Consumer Confidence in the UK Falls at Fastest Quarterly Rate Since 2022
UK Borrowing Costs Rise Sharply on Gilt Markets Amid Fiscal and Political Concerns
UK Government Plans Legislation to Bring British Steel into Public Ownership
UK Government Secures £210 Million Nuclear Fuel Deal to Support Ukraine Energy Security
London Ambulance Service Reports Record Emergency Call Volume Amid Severe Heatwave
United Kingdom Faces Record June Heatwave as Temperatures Hit 36.7°C in Somerset
UK Financial Services Reform Debate Intensifies Over Ministerial Regulatory Powers
UK Energy Price Cap Rise Expected to Keep Inflation Above Target Through 2026
UK Biohacking and AI Wellness Trends Drive Surge in Personal Health Monitoring
×