Is a recession coming in 2022? Is UK heading for an economic downturn - what fall in GDP means for economy

Experts have said the UK faces a ‘cocktail of challenges’ in the following months

There are renewed fears that the UK is heading for a recession after the Office for National Statistics (ONS) released its latest figures.

The ONS reported that the UK economy shrank by 0.3% in April, amid soaring living costs and unprecedented rising fuel prices.

Experts have said the UK faces a “cocktail of challenges” in the following months.

The UK’s GDP has fallen for the second month in a row, falling 0.1% in March and having no growth at all in February.

When the news broke on 13 June, the markets reacted strongly, with the pound falling 1.5 cents against the US dollar and stock market shares in the UK dropping 1.5%.

Here’s everything you need to know about whether a recession is coming.

Is a recession coming in 2022?

Experts certainly believe that the UK is headed for a recession in 2022.

The unemployment rate in the last recession rose to 10% (Pic: Tolga Akmen / AFP via Getty Images)

The ONS said experts had been expecting a 0.1% GDP rise in April and were shocked to discover a 0.3% drop.

Whilst the UK is still 0.9% above levels before Covid-19, GDP has fallen 0.4% since January.

The latest figures marked the first time that GDP has fallen two months in a row since the global pandemic in March and April 2020.

The Organisation for Economic Co-operation and Development (OECD) group, which represents wealthy nations have predicted that the UK will fall behind every other developed economy except Russia.

However, their experts could not agree on the question of whether the UK would go into a recession in 2022.

What does the fall in GDP mean for the economy?

The cost of living crisis has been hitting the British public hard.

In April, prices for fuel and energy bills rose a staggering 54%, all whilst the new national insurance hike left workers with less money in their pockets.

The war in Ukraine has triggered soaring food costs and staggering prices at the pumps.

The average petrol price hit 185.04p for the first time on 12 June, while diesel reached a new record of 191.03p.

In May, it was also announced that the Bank of England was raising its inflation rate to 9% and predicts it will top 10% by the end of 2022

Chief economic adviser to the EY Item Club, Martin Beck gave a bleak overview of what is to come.

Beck said: “An already serious squeeze on households’ spending power will be negatively affected by the inflationary impact of global supply chain frictions and sterling’s recent weakness.”

What has the Bank of England said?

The Bank of England has predicted that inflation will reach 10% by the end of 2022.

The Office of National Statistics (ONS) found that GDP in the UK fell by 0.3% in April (Pic: Getty Images)

The average target for inflation sits at just 2%.

It is expected to make an announcement on interest on 16 June, with further rises predicted.

This will add additional strain to already overwhelmed household budgets and will mean that people will not have money spare to spend on goods or services, which will impact the UK’s economy even further.

What is a recession?

A recession is defined as a time when a country goes through economic decline.

The UK’s wealth is calculated by their GDP.

When this rate goes down, it causes the economy to shrink, with less wealth being generated.

If the GDP declines for two quarters in a row (six months), this is defined as a recession.