UK think tank the National Institute of Economic and Social Research (NIESR) has predicted the UK will go into recession in 2022.
The cost-of-living crisis coupled with high inflation rates, has seen the UK economy grow at the slowest rate in a year.
The Office for National Statistics (ONS) said that gross domestic product (GDP) had fallen by 0.1% on a monthly basis after growth stalled in February.
GDP in the UK is currently at 0.7% leading to fears another recession is on the horizon.
In May, the UK’s rate of inflation peaked at 9%, the highest it has been since 1982.
Here’s everything you need to know about what a recession is and how long it could last.
What is a recession?
A recession is when a country experiences economic decline.
The UK’s wealth is calculated by their GDP.
When the GDP rate goes down, like it has done in recent months, the economy will shrink.
If the GDP declines for two quarters in a row (six months), this is defined as a recession.
Is the UK going into a recession?
UK think tank the NIESR predicted on 11 May that the UK would go into recession.
The current GDP rate of 0.7% has been falling every month since February.
Households have been feeling the squeeze as the cost-of-living crisis sees interest rates soar to their highest levels in 30 years.
On 18 May the UK inflation rate increased from 7% to 9%, the highest it has been in forty years.
There are concerns that the high inflation rate will impact households already struggling with soaring energy and food costs.
Speaking to BBC News about the cost of living crisis, Dame Clare Moriarty, chief executive of Citizens Advice said: “There are desperate stories behind these figures.
“People washing in their kitchen sinks because they can’t afford a hot shower; parents skipping meals to feed their kids; disabled people who can’t afford to use vital equipment because of soaring energy bills.”
Chancellor Rishi Sunak blamed the UK’s slow recovery on the War in Ukraine.
Sunak said: “Our recovery is being disrupted by Putin’s barbaric invasion of Ukraine and other global challenges, but we are continuing to help people where we can.”
What happens in a recession?
In a recession, the economy struggles, as the wealth of a country has shrunk due to the low GDP.
This means that some businesses may have to find ways to save money and people could lose their jobs.
With growing rates of inflation, people find that their wages are not covering their everyday essentials like petrol, electricity or heating costs.
In the last big recession in 2008, unemployment levels peaked at 10%.
How long does a recession last?
The length of time a recession lasts depends on the measures the government put in place to help revive the economy.
According to Forbes Magazine, the average recession in the USA lasts for 11 months.
After the 2008 recession, it took the UK five years to get its economy back on to the size it was before the fallout.
When was the last UK recession?
The last time the UK entered a recession was August 2020.
Due to the Covid-19 pandemic, businesses closed with many people losing their jobs and the GDP fell by 20.4%.
The most famous recession to hit the UK was the crash of 2008.
Dubbed the great recession, it was caused by rising energy prices and the collapse of the housing market.
This recession lasted for five quarters and was the longest one on record since the second world war.
The downturn of 2008 was global, impacting all of the G7 countries.
Overnight, big businesses went bankrupt from Lehman Brothers to the Royal Bank of Scotland, which had to be bailed out by the UK government.
What happens when there are high rates of inflation?
Recession is more likely when inflation is high.
Soaring inflation rates mean that consumers will be paying more for products than they previously did.
If a bottle of milk cost £1, and inflation is 9%, then customers would pay an extra 9p.
People will find that their money will not go as far as it used to, with the poorest households being hit the hardest.
The Bank of England has warned that inflation rates will peak at 10% by the end of 2022.