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Business News/ News / India/  UK to slip into recession before 2024 end? Here's what we know
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UK to slip into recession before 2024 end? Here's what we know

High chance of UK recession by 2024, widening inequality, and potential challenges for ruling party in upcoming election.

Britain's Prime Minister Rishi Sunak speaks with attendees as he visits the Great British Beer Festival in west London (AP)Premium
Britain's Prime Minister Rishi Sunak speaks with attendees as he visits the Great British Beer Festival in west London (AP)

There is a high possibility that the next UK election will be fought against the backdrop of a recession. The National Institute of Economic and Social Research recently predicted a 60% possibility of recession by the end of 2024 and highlighted the widening of the gap between the prosperous and less well off parts of Britain. The forecast also echoes recent Bank of England assertions that the GDP would remain below pre-pandemic levels “in the medium term."

“Despite continuing to expect the United Kingdom to steer clear of a recession in 2023, GDP is projected to grow barely by 0.4 per cent this year and by 0.3 per cent in 2024, with the outlook remaining highly uncertain. There are, in fact, even chances that GDP growth will contract by the end of 2023 and a roughly 60 per cent risk of a recession at the end of 2024," the report said. 

The projections shared by the thinktank also counter the ruling Conservative Party's promise to “level-up" the country’s regions and reduce inequality. With the UK now headed for five years of lost economic growth, the Rishi Sunak-led government faces a complicated re-election bid in January 2025.

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Gross domestic output is unlikely to return to its pre-pandemic level before 2024. In the first quarter of 2023, the UK's GDP had been 0.5% below the level of GDP before the pandemic. The NIESR forecast said that it would not pass this level “until the third quarter of 2024" and also forecast inflation continually above target until 2025. 

“The triple supply shocks of Brexit, Covid and the Russian invasion of Ukraine, together with the monetary tightening that has been necessary to bring inflation down, have badly affected the UK economy," Bloomberg quoted NIESR’s Stephen Millard to explain.

As the recent bank rate hikes begin to take effect, NIESR expects inflation to drop to 5.2% by the end of 2023 and to 3.9% by the end of 2024.

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While the thinktank believes the western nation will avoid such a scenario this year, the economy is projected to grow a scant 0.4%. There is also a possibility of a contraction by the end of 2023. There is a roughly 60% risk of a recession at the end of 2024 as per the think tank.

“Low economic growth and stagnant productivity is increasing the financial vulnerability of households in the bottom half of the income distribution and the incidence of destitution at the poorest end. Our projections for the General Election year of 2024 suggest that inequalities of income and assets will grow, with little real income growth for many, low or no savings, higher debt, as well as elevated housing, energy and food costs. As a consequence, the shortfall in the real disposable incomes of households in the bottom half of the income distribution is set to reach some 17 per cent in the period 2019-2024," the report adds. 

(With inputs from agencies)

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Published: 10 Aug 2023, 05:19 AM IST
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