BRITAIN’S economy is set to officially enter into a recession this week.
On Wednesday the Office for National Statistics is expected to show that GDP – or gross domestic product – has fallen for a second financial quarter in a row.
Economists consider two consecutive three-month periods where GDP falls as the technical definition of a recession.
We take a look at what a recession is and how it will affect your finances.
Technically, not yet – but economists expect a drop of around 20 per cent for quarter two will be announced on Wednesday.
Dr Howard Archer, chief economic advisor to EY ITEM Club, told The Sun: “There is no doubt UK will be officially in recession when second quarter GDP data are released on Wednesday.
“This will likely show record contraction of at least 20 per cent quarter-on-quarter in Q2. However, data will likely show improved growth in June.”
“Economy will undoubtedly return to growth in Q3 – we expect expansion of at least 12 per cent quarter-on-quarter.”
When the coronavirus recession is confirmed it will be the first recession since the 2008 financial crash.
Experts also predict that it will be the worst recession since the 1930s Great Depression.
During a recession there will be a rise in unemployment.
Today, the Chartered Institute of Personnel and Development (CIPD) warned that one in three business is planning to cut jobs.
It has been predicted that unemployment could treble to 3million this year.
Employees may find it harder to get promotions or pay rises.
While those graduating from university or leaving school may find it harder to get a first job.
During a recession you may find it harder to get credit.
Banks have already started cutting deals on the top credit cards. While Sainsbury’s has stopped giving credit cards and loans to self-employed workers.
Some banks have also turned down furloughed workers for mortgages.
It is expected that we will see a rise in personal insolvencies and home repossessions too. Although the FCA has banned the repossession of homes until October 31.
The International Monetary Fund (IMF) has predicted that the recession will be over next year and the world economy will start bouncing back.
Although, experts have warned that the strength of recovery in the UK will depend on how much unemployment rises and whether there is a second coronavirus wave with renewed restrictions.