The UK has fallen into the “largest recession on record” according to official figures from the Office for National Statistics (ONS). The British economy has suffered its biggest slump on record as the coronavirus pandemic impacts the country. But what happens during a recession and how will it impact you?
What is a recession?
A recession is a significant decline in economic activity which can last for several months or even years.
A recession is a significant decline in economic activity that lasts for months or even years. Experts declare a recession when a nation’s economy experiences negative gross domestic product (GDP), rising levels of unemployment, falling retail sales, and contracting measures of income and manufacturing for an extended period of time.
Many economists and experts disagree about the exact definition of a recession, but technically speaking, the UK economy slides into recession when it experiences two successive quarters of what is known as “negative growth”.
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The report further found monthly GDP rose by 8.7 percent during June 2020, but is 17.2 percent below February 2020 levels.
Analysis of our Monthly Business Survey (MBS), which is a collection of information on monthly turnover of UK businesses within the production and service sectors, returns and external data, including comments from more than 10,000 businesses, had increasing output as demand had increased following the easing of social distancing and lockdown measures.
The organisation added businesses are striving to maximise output while working within official guidelines.
Services experienced widespread growth in June 2020, where the easing of lockdown measures, most notably in England.
This had a most positive impact with nearly half of growth from the wholesale and retail trade; repair of motor vehicles and motorcycles sector.
Manufacturing and construction also saw widespread growth during June 2020, primarily because of increased demand and the recommencement of work, as businesses managed to operate while adhering to social distancing measures.
How does a recession impact you?
Recessions can have a huge impact on individuals, families and businesses.
One way in which it might affect you is by putting many jobs across different sectors in jeopardy.
Job loss affects the stability of families and individuals and during a recession unemployment rates run extremely high.
Those who lose their jobs can find it extremely hard to find new work to buy food and pay the bills each month.
Employers are unlikely to hire many new staff members during a recession as the economy is uncertain meaning companies will endeavour to keep their costs down.
These financial struggles can also put familial relationships under pressure due to the pressures and impact of financial instability.
Many families may need to borrow money from relatives, friends or banks which can cause relationships to become tense.
During a recession hospitality, leisure and entertainment businesses tend to be hard-hit by people’s reduction in discretionary spending.
Families and individuals tend to tighten their belts and cut back on spending on extracurricular activity expenses.
Entrepreneurs may have a lack of funds available for borrowing or starting new companies during a recession, which means certain sectors could remain stagnant with no or low new entrants into these markets.
Businesses are also unlikely to take financial risks at this time leading to further stagnancy.
During a recession property values fall drastically and foreclosures increase meaning many families could be forced out of their homes.
Howrver, for those able to buy during these difficult times property is considered a relatively safe investment and it is a good time to buy as property prices will be lower than outside of a recession period.
The Government has implemented a stamp duty holiday on the first £500,000 of all property sales in England and Northern Ireland until March 2021 in a bid to encourage buyers.
However, many buyers who were hoping to use a 95 percent mortgage have been unable to buy in recent weeks as several lenders are no longer offering these mortgages meaning they have been forced to increase their deposit amount before buying.