The UK is in recession – what does that mean, and how does it actually affect me?

The results are in: the UK officially went into a recession at the end of last year, after the economy shrank by more than expected.

That’s bad for prime minister Rishi Sunak, because he has previously said growing the economy is one of his five key priorities.

But it’s also not great news for ordinary people either, because it means there’s less money going around.

Here’s what going into a recession actually means.

What is a recession?

Britain is in a recession if gross domestic product, a key measure of how the economy is doing, falls for two consecutive three-month periods, known as quarters.

GDP is the value of all the goods and services the UK produces, and is measured by the Office for National Statistics, a government agency.

Most of the time, economies like the UK’s are gradually growing, as people make, sell and buy more things, and GDP tends to rise with it.

But the economy has now started shrinking, which indicates people have a bit less cash than before to do all of those things.

So what actually happened?

Across the whole of 2023, the British economy still grew by 0.1 per cent. But within that, it shrank by 0.1 per cent and 0.3 per cent the final two quarters, respectively.

The last time the UK went into a recession was in 2020, at the height of the coronavirus pandemic, when people stopped going out and buying things.

Before that, you have to go back as far as 2008, when the global financial crisis happened. Then, the economy shrank for five consecutive quarters, or 15 months.

Does it affect me?

Yes. Economic growth is broadly seen as a good thing, because it means there are more jobs going and, in some cases, higher wages.

That also means the government makes more money through tax, which it can spend on social support like benefits, public services like the NHS, and government workers’ wages.

When it shrinks, it usually means people end up losing their jobs, and graduates and school leavers have a harder time finding employment.

But the worst effects tend to be for people who already don’t have much money, with benefit recipients potentially standing to lose out if the government decides to spend less on public services.

Given that the UK is already in a cost of living crisis, that could be devastating for some people.

The good – or slightly less bad – news is that just because the ONS has declared a recession this morning, things won’t suddenly change overnight.

The announcement just confirms something we already knew: the economy isn’t in great shape right now.

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