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How do you measure the health of the economy?
The Office for National Statistics (ONS) publishes figures for the UK's Gross Domestic Product (GDP). This is the value of all the goods and services the UK produces.
When GDP rises, a country's economy grows and average incomes rise as a result.
But sometimes the economy shrinks, GDP falls, and that's a sign that the economy is doing badly, which could hit people's pockets.
What is GDP and how does it affect me?
What is a recession?
The UK is in recession if GDP falls for two successive three-month periods - known as quarters.
The economy shrank 0.1% between July and September last year and then by a further 0.3% between October and December.
This meant the economy went into recession at the end of 2023.
But the latest figures from the ONS show the UK economy grew by 0.6% between January and March 2024, marking the end of the recession.
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When was the previous UK recession and how long did it last?
The previous UK recession was in 2020, at the height of the coronavirus pandemic.
It only lasted for six months, although the 20.4% fall in GDP recorded between April and June 2020 was the largest on record.
In 2008 a recession started as a result of the global financial crisis, and went on for five quarters, or 15 months.
What happens in a recession and how could one affect me?
Economic growth can mean more jobs are available and companies can pay more to employees and shareholders.
Higher wages and larger profits also generate money for the government through taxes.
It can choose to spend more on things like benefits and public services, or cut tax rates.
When the economy shrinks and a country goes into recession, these things can go into reverse.
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Some people might lose their jobs, and unemployment could rise.
Others may find it harder to be promoted, or to get big enough pay rises to keep pace with price increases.
However, the pain of a recession is typically not felt equally across society, and inequality can increase.
Benefit recipients and those on fixed incomes are particularly likely to struggle, especially if the government decides to spend less on public services.
How can you get out of a recession?
In a recession, the Bank of England - which is independent of government - typically cuts interest rates.
This makes it cheaper for businesses and households to borrow money which can boost spending and economic growth.
However, prices have been rising very quickly in the UK, and the Bank put interest rates up to tackle that inflation.
After 14 rate increases,the Bank has held interest rates at 5.25% six times in a row.
When the economy is struggling to grow at the same time as there is high inflation, there can be a situation called "stagflation".
This can be very difficult to solve, because the two issues require different solutions.
However in May 2024, Bank of England governor Andrew Bailey told the BBC that the UK economy had "turned a corner".
How does the UK's economy compare with other countries?
With growth of 0.6% from January to March this year, the UK was the joint fastest growing economy in the G7 group of industrialised nations.
But until then, the UK had been one of the weaker members of the G7.
The US economy grew by 3.3% in the fourth quarter of 2023, which was much better than expected.
That put the US at 2.5% over 2023 as a whole, the best performance of all other advanced economies. It is also expected to outperform the rest of the G7 in 2024.
In October 2023, the International Monetary Fund (IMF) predicted that the UK would grow by just 0.6% in 2024.
The independent Office for Budget Responsibility (OBR) expects the UK economy to grow by 0.7% in 2024, but that is less than half of its earlier prediction of 1.8% growth.
How will the UK economy compare to others in 2024?
Related Topics
- Economics
- Recession
- GDP
- Economic growth
- UK economy
