THE UK has officially entered into recession after the economy shrunk by a record 20.4 per cent in three months.
It’s the first time in 11 years that the UK has tipped into a recession.
Economists consider two consecutive three-month periods where GDP falls as the technical definition of a recession.
The latest GDP figures released by the Office for National Statistics (ONS) this morning showed that GDP fell by 20.4 per cent between April to June.
It follows a drop of 2.2 per cent between January to March.
Meanwhile, monthly figures showed the economy bounced back by 8.7 per cent in June, following growth of 2.4 per cent in May as lockdown restrictions were eased.
But the ONS said the economy is still a long way off from recovering the record falls seen in March and April after tumbling into "the largest recession on record".
How to recession proof your finances
IF you're worried about the recession hitting your finances then we explain how to protect yourself.
CHECK YOUR FINANCES Take a look at where you can cut costs. Are there any subscriptions you could cancel? Could you haggle down a bill? Reassess your finances and work out where to save cash and then save this money into a rainy day fund.
PAY OFF YOUR DEBTS Make sure you're repaying priority debts and if you're struggling speak to your lender. Use a tool such as MoneySavingExpert.com's eligibility checkers to check which cards and loans you're likely to be accepted for without it hurting your credit score. You can get FREE debt advice from places like Citizens Advice and StepChange.
DIVERSIFY YOUR PENSIONS AND INVESTMENTS If you've got a pension or investments make sure your pots are well diversified. Being overexposed to one asset class or one particular company could put your savings at risk if something goes wrong.
The UK economy was last in a recession in 2008/2009 following the financial crash.
Jonathan Athow, deputy national statistician at the ONS, said: "The recession brought on by the coronavirus pandemic has led to the biggest fall in quarterly GDP on record.
"The economy began to bounce back in June with shops reopening, factories beginning to ramp up production and housebuilding continuing to recover.
"Despite this, GDP in June still remains a sixth below its level in February, before the virus struck.
"Overall, productivity saw its largest-ever fall in the second quarter.
"Hospitality was worst hit, with productivity in that industry falling by three-quarters in recent months."
How will the recession affect your finances?
During a recession there is a rise in unemployment.
Earlier this week, the Chartered Institute of Personnel and Development (CIPD) warned that one in three business is planning to cut jobs.
It has been predicted that unemployment could treble to 3million this year.
Employees may also find it harder to get promotions or pay rises.
While those graduating from university or leaving school may find it harder to get a first job.
You may find it harder to get credit, and banks have already started cutting deals on the top credit cards.
While Sainsbury's has stopped giving credit cards and loans to self-employed workers.
Some banks have also turned down furloughed workers for mortgages.
It is expected that we will see a rise in personal insolvencies and home repossessions too. Although the FCA has banned the repossession of homes until October 31.
The International Monetary Fund (IMF) has predicted that the recession will be over next year and the world economy will start bouncing back.
Although, experts have warned that the strength of recovery in the UK will depend on how much unemployment rises.
It'll also depend on whether there is a second coronavirus wave with renewed restrictions.
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