Priya Patel
TLDR:
- News that the UK entered a recession at the end of 2023 has triggered fears about the potential impacts on borrowing, jobs, and wages
- A recession can result in job losses, lower wages, and a credit crunch which can impact individuals in different ways
News that the UK entered a recession has raised concerns about the potential effects on personal finances. The UK’s economy shrank by 0.3% in the fourth quarter of 2023, marking the second consecutive quarter of negative growth and officially putting the country in a recession. This economic downturn could lead to job losses, lower wages, and a credit crunch, affecting individuals in various ways.
During a recession, businesses may struggle, leading to lower salaries and potential redundancies for employees. Those who manage to keep their jobs may face lower real-terms pay due to increased costs of living. Experts recommend building an emergency cash fund to cushion any income loss and paying off debt to prepare for uncertain times.
While interest rates on borrowing may decrease during a recession, making it potentially good news for mortgage holders, banks tend to become more cautious about lending money. This can make it harder and more expensive to obtain credit cards, loans, or mortgages. Investors may need to adapt their investment strategy to a more defensive style, choosing stocks and funds that are resilient during economic cycles.
Analysts have described the current recession as mild and suggest that the UK may already be heading out of it. Despite challenges, the economy still grew by 0.1% over the whole of 2023, offering some hope for a recovery. The impact of the recession may vary for different individuals, with the poorest often bearing the brunt of the economic downturn.
