I am very out of the loop with economy and politics but the economic crisis is slowly taking its toll and I wondered what the likelihood of seeing the end soon is.
Is this like the ’08 recession even though we aren’t technically in a recession? What difference does it make being in a recession and not?
Is it ever likely to get better? If so, realistically, when?
In: 2
I question the premise of this about the UK being in a crisis, but I will try to answer. A crisis isn’t a very scientific term, its more or less a newspaper term. “There is a crisis in the UK!” Sounds scarry.
I don’t know the current GDP quarterly projection for the UK but other posters have said its negative. To be clear data about how much an economy is growing or shrinking tends to be adjusted after it first comes out. So someone might say GDP is 4.5% for 2022, but later in 2023 they say GDP for 2022 was really closer to 3.3.
So the measure for economic growth is GDP (Gross Domestic Product). Its a formula that is mostly made up by economists to try to compare and learn something about how well the economy is going in a country. Its a very imperfect measure. The GDP may be growing but you could be laid off and feel very poor. In fact, the GDP could be growing and ONLY ONE PERSON could be getting extremely rich while everyone else is getting poorer. That is an unrealistic statement but the math could work out in a fantasy world.
So a recession is a term that economists use to indicate that a countries GDP is shrinking for 2 successive quarters. That hasn’t happened yet in the UK so… not in a recession. Remember that the data often gets revised downward as time goes on thats how its possible to be in a recession and not know it yet 🙂 Funny isn’t it?
What is this GDP and why does this have anything to do with the wellbeing of the UK? Well, the GDP is basically the sum (complicated math here) of all the goods and services produced in the country. You can think of it as the country’s income. If GDP goes up, then the country got a raise, and if it goes down then the country got a pay cut.
Thats the key part. If you are in a recession, the country got a pay cut. That means, on average, the country has a little less spending power (or value, or whatever) than it did previously. That typically leads to deficits and budget cuts and its usually indicative of the population having less… fewer jobs, less income, etc
So the UK may or may not be in recession. What IS going on there is a huge adjustment. Brexit, and the covid pandemic radically changed the economic playing field for the UK. While the effects of Brexit are more clear the covid pandemic snarled supply changes and really impacted inflation. Further, the war with Russia has seriously messed up the oil/gas commodity markets. Markets that were good may not be good now, and new markets may be opening up. IE, many people had jobs trading with Europe that may now be screwed, but perhaps (since GDP is going up) there are other opportunities happening. Market adjustments are major disruptors and generally people don’t like them. It means the old way of doing business isn’t the new way of doing business.
That is happening in the UK. You may have an opinion about Brexit being good or bad, but no matter your opinion, the fact on the ground is that the British economy is going to change because of Brexit and some people will be losers and some people will be winners. The winners won’t feel a downturn but the losers will.
Will it ever end? Yes, the rules of the game changed with both Covid and Brexit. But there are new rules, and the economy will stabilize. The loosers will find new jobs and move on and hopefully find new ways to prosper. If the GDP keeps growing this will be a good sign. If the GDP growth stalls out then its kind of a sign that the country is doing something wrong, or generally didn’t recover from the economic changes well.
Latest Answers