Britain is projected to face more frequent technical recessions in the coming years as the economy’s growth potential has significantly slowed, new analysis from Bloomberg Economics has revealed.
The study suggests the UK’s reduced economic capacity has made it more vulnerable to growth shocks, painting a concerning picture for the nation’s financial future.
A recession is defined as happening when a nation’s economy experiences two consecutive quarters of negative gross domestic product (GDP) growth.
While these more frequent downturns may not necessarily lead to major job losses, they represent a significant challenge for both Government and Bank of England policymakers.
The analysis reveals a dramatic decline in Britain’s trend growth rate – the sustainable pace at which the economy can expand without triggering inflation
Do you have a money story you’d like to share? Get in touch by emailing [email protected].
Analysts are warning the UK faces multiple recessions
GETTY
From 1955 to 2009, the UK’s trend growth rate averaged 2.5 per cent annually but this has now halved to just 1.2 per cent for the years ahead.
Bloomberg Economics identified 15 episodes since 1955 when the economy experienced shocks substantial enough to trigger a technical recession, based on current trend growth rates.
The frequency of these downturns is expected to increase significantly, with recessions potentially occurring every five years and marks a concerning shift from the historical pattern, where recessions typically happened once every eight years.
Bloomberg Economics’ chief UK economist Dan Hanson said: “There are good reasons to think technical recessions will be more frequent in coming years than in the past.
Experts are warning the UK economy could take a hit GETTY “The UK’s trend rate of growth has fallen, meaning the shocks that would previously have prompted growth just to slow, are now enough to generate a fall in output.”
However, Hanson offered some reassurance, noting that these more frequent technical recessions are unlikely to result in major economic downturns accompanied by surging unemployment.
The UK economy has already shown signs of this increased vulnerability to downturns, having experienced a mild recession in the latter half of 2023.
This downturn was primarily driven by the combined pressures of inflation and higher interest rate with more recent data showing the economy continued to struggle, as GDP showed no growth in the third quarter of 2024.
The Bank of England’s outlook remains cautious, with expectations of zero growth for the fourth quarter of 2024 as well. While some improvement is anticipated for 2025, growth is expected to remain significantly below pre-financial crisis levels.
These recent economic indicators appear to support Bloomberg Economics’ analysis of a more fragile British economy, increasingly susceptible to periods of negative growth.
LATEST DEVELOPMENTS:
Starmer has promised to grow the UK economy
KEIR STARMER
Labour’s Chancellor Rachel Reeves has emphasised her commitment to addressing these economic challenges. Speaking at Davos on Wednesday, Reeves highlighted the need to “turbocharge the economy” in an interview with Bloomberg News Editor-in-Chief John Micklethwait.
She specifically pointed to the importance of infrastructure projects and planning decisions, arguing that Britain needs to change its approach.
“That’s been the problem in Britain for a long time,” Reeves said. “That when there was a choice between something that would grow the economy and sort of anything else, anything else always won.”
The Chancellor also stressed that the “answer can’t always be no” when it comes to major infrastructure projects. This comes as Prime Minister Keir Starmer’s Labour Government, which took power last July, faces pressure over a sharp economic slowdown during their tenure.