What is a recession?
A recession is a significant drop in economic activity that can last for several months or even years.
Experts declare a recession when a country’s economy experiences negative gross domestic product (GDP), rising unemployment, falling retail sales, and contraction of income and manufacturing measures for an extended period of time.
Many economists and experts disagree on the exact definition of a recession, but technically the UK economy slips into recession when it experiences two successive quarters of what is known as ‘negative growth’ .
READ MORE: What is a recession, what does a recession mean to me?
Is the UK in recession?
The ONS released a report this morning saying the UK has officially entered a recession.
The report reads: “The economy is in technical recession after the second quarter (April to June) 2020 saw a record drop of 20.4%, following a significant shock since the start of the pandemic coronavirus (COVID-19); this follows a drop of 2.2 percent in the first quarter (January to March) 2020. ”
This means that the economy has shrunk by 20.4% compared to the first three months of the year.
Officials said the economy rebounded in June as government restrictions on movement began to ease.
The report also found that monthly GDP grew 8.7% in June 2020, but was 17.2% below February 2020 levels.
Analysis of our Monthly Business Survey (MBS), which is a collection of information on the monthly turnover of UK businesses in the production and service sectors, returns and external data, including comments from more than 10,000 companies, had increased production as demand increased following the relaxation of social distancing and lockdowns.
The organization added that companies strive to maximize production while adhering to official guidelines.
Services saw widespread growth in June 2020, where the easing of lockdown measures, especially in England.
This has had a very positive impact with almost half of the growth in wholesale and retail trade; motor vehicle and motorcycle repair sector.
Manufacturing and construction also saw widespread growth in June 2020, mainly due to increased demand and resumption of work as companies managed to operate while adhering to social distancing measures.
What Happens During a Recession?
A recession has a huge impact on the economy which then impacts individuals and businesses.
General unemployment tends to rise rapidly during a recession and often remain high.
Further, with the onset of the recession as businesses face increased costs, stagnant or declining revenues and pressure to repay their debts they are starting to lay off workers in order to cut costs.
The number of unemployed in many sectors is increasing simultaneously and the newly unemployed find it difficult to find new jobs during the recession.
In addition, the average duration of workers’ unemployment is increasing.
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How does a recession affect you?
Recessions can have a huge impact on individuals, families and businesses.
One of the ways this could affect you is by jeopardizing many jobs in different industries.
Job loss affects the stability of families and individuals and during a recession unemployment rates are extremely high.
Those who lose their jobs may find it extremely difficult to find a new job to buy food and pay the bills each month.
Employers are unlikely to hire many new staff during a recession as the economy is uncertain, which means companies will strive to cut costs.
These financial struggles can also put strain on family relationships due to the pressures and impact of financial instability.
Many families may need to borrow money from relatives, friends, or banks, which can make relationships strained.
In times of recession, hospitality, leisure and entertainment businesses tend to be hit hard by reducing people’s discretionary spending.
Families and individuals tend to tighten their belts and cut spending on extracurricular activities.
Entrepreneurs may run out of funds to borrow or start new businesses during a recession, which means some sectors may remain stagnant with little or no new entrants into those markets.
Companies are also unlikely to take financial risks at this point, leading to further stagnation.
During a recession, property values drop dramatically and foreclosures rise, meaning many families could be forced out of their homes.
However, for those who are able to buy during these difficult times, property is viewed by some as a relatively safe investment and now is a good time to buy as property prices will be lower than outside of it. ‘a period of recession.
Others say, however, that it is wise to avoid investing in property at this time as people may choose not to sell their home at such an uncertain time, resulting in lower inventory.
This can mean that homes that go on the market can end up being a bad deal, with potential problems.
The government has introduced a stamp duty holiday on the first £ 500,000 of all property sales in England and Northern Ireland through March 2021 in a bid to encourage buyers.
However, many buyers who were hoping to use a 95% mortgage have not been able to buy in recent weeks as several lenders no longer offer these mortgages, meaning they have been forced to increase the amount of. their deposit before buying.