The UK has fallen into a recession which will be the longest since records began in the 1950s, economists have warned.
Accountancy firm KPMG said the country dropped into recession, defined as two consecutive quarters of decline, in the third quarter of the year.
And forecasters expect the downturn to last until the end of next year, knocking 1.9 per cent off the UK’s economic output.
Warning: Accountancy firm KPMG said the country dropped into recession in the third quarter of the year
Chief economist Yael Selfin said the decline is being driven by the soaring energy and food prices facing households.
They have suffered the biggest drop in living standards on record as the surging cost of living eats into wages. Soaring interest rates in the wake of Liz Truss and Kwasi Kwarteng’s disastrous mini-Budget also ‘added a headwind’ to growth, KPMG said in its economic outlook report.
And Selfin said families, particularly those on lower incomes, will rein in spending in the New Year, and eat out less often. Households had already started cutting back by the time energy bills shot up to £2,500 for a typical household in October.
And KPMG added that by the middle of 2024 spending in the UK per person will have fallen by 3.4 per cent. Despite Britain facing the longest recession on record, Selfin said it will be ‘less severe’ than downturns in the 1970s and the recession caused by the financial crisis in 2008.
And in a reason for optimism, Selfin said the picture could turn more positive, particularly if energy bills return to more normal levels.
KPMG’s report also showed unemployment in the UK will remain relatively low, providing ‘an important support to incomes’.
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