There are growing fears that the UK will enter a recession in 2022.
In May, the Bank of England announced that the UK interest rate had risen to 9%, the highest it’s been in 40 years.
The cost of living crisis has seen households feel the squeeze as they try to keep up with soaring energy and fuel costs.
The UK economy has grown the slowest rate in a year, with the Gross Domestic Product (GDP) falling every month since February 2022.
With the interest rate predicted to rise to over 10% by the end of 2022, there are concerns that a UK recession is around the corner.
Here’s everything you need to know about the last UK recession.
When was the last recession?
The last time the UK entered a recession was at the height of the Covid-19 pandemic in August 2020.
Due to people isolating themselves and staying at home, many businesses closed and people lost their jobs.
This led to the GDP which measures the size of a country’s economy falling by 20.4%.
The most famous and longest lasting recession to hit the UK was the ‘Great Recession’ of 2008.
This was caused by rising energy prices and the collapse of the housing market.
It lasted for five financial quarters and was the longest recession on record since the second world war.
The recession of 2008 was global, impacting all of the G7 countries.
Overnight, household names went bankrupt from Lehman Brothers to the Royal Bank of Scotland, which had to be bailed out by the UK government.
The UK unemployment rate rose significantly to 10%.
What is a recession?
A recession is when a country’s economy starts to go into decline.
The wealth of the UK is measured by its GDP, when this begins to fall, the economy will shrink, which means that people find their money does not go as far as it used to.
A recession is when a country’s GDP declines for two financial quarters in a row (six months).
How long did it take to recover?
The recession of 2008 had a lasting impact on the economy and employment.
The employment rate did not fully recover to its pre-recession rate until 2015.
By the end of 2011 almost 2.7 million people had lost their jobs.
The unemployment rate caused by the recession was the highest it had been since 1995.
The UK economy took five years to recover, with GDP shrinking by more than 6% between 2008 and 2009.
Earnings have still not officially recovered since the recession, with the public sector pay freeze in 2011 and pay cap in 2013 impacting workers wages.
What do high interest rates mean?
High interest rates mean that consumers will end up paying more for everyday items than they did previously.
Recession is more likely when inflation rates are high as people do not have money to spend on things other than household essentials.
On 18 May the Bank of England announced that the interest rate had risen to 9%, the highest it has been in 40 years.
They have predicted that this rate will rise to 10% by the end of 2022, which could have a stark effect on the UK’s economy.