The UK economy shrank 20.4 percent between April and June compared with the first three months of 2020, it was announced today. The statistics follow a plunge in household spending, after businesses were ordered to close in order to try to slow the spread of coronavirus.
In light of the news, John Westwood, Group Managing Director at Blacktower Financial Management Group has suggested some top tips on how members of the public may be able to “recession proof” their finances.
Among them was a warning when it comes to savings.
Safety proof your savings
“It’s important to ensure your savings are protected by [the] Financial Services Compensation Scheme (FSCS) – this will cover your savings up to £85,000,” he said.
Stop using your credit card
Another word of warning was issued, this time with regards to credit card debt.
“Now is the time to stop spending on your credit card bill and clear any debts you may have,” said Mr Westwood.
“If you’re paying any interest on your credit card, switch to a zero percent balance card, this will give you in some instances 30 months to pay off debts without any interest.”
Build an emergency cash stash
“It’s important to build up a rainy day fund that you can fall into if you face any unexpected costs.
“We advise to build up an emergency fund that’s at least three months of your outgoings, so add up your bills and essentials to work out how much you will roughly need.”
Despite the UK officially entering a recession, the Office for National Statistics has said the economy bounced back in June as the government restrictions began to ease in parts of the UK.
On a month-on-month basis, the economy grew by 8.7 percent in June, following growth of 1.8 percent in May.
It’s something which Azad Zangana, Economist at Schroders, has pointed out.
“Headlines will focus on the record fall in GDP for the second quarter, as the economy contracted by 20.4 percent,” he said.
“It follows a smaller contraction in the first quarter and therefore confirms the recession all had expected as the economy struggles to cope with the coronavirus pandemic.
“However, within the quarterly figures are clear signs of a rebound.
“The latest official figures show the economy grew by a record 8.7 percent in June compared to May, meaning that the level of GDP is now 17.1 percent below its previous peak, compared to 25.5 percent back in April.
“Therefore, the recession is likely to have already ended and a strong rebound – potentially even double digit growth – is expected for the third quarter.”