UK economy avoids recession as GDP unexpectedly inches up 0.2%

THE UK economy grew 0.2% over the three months to June, the Office for National Statistics has revealed.

The ONS previously said there was a 0.1% fall in Gross Domestic Product (GDP) for the quarter - between April to June.

It means the economy grew slightly when previously it was thought to be shrinking.

It indicates the country is not currently in a recession.

The Bank of England warned that the economy will officially enter recession by the end of the month.

A country is in recession when its economy shrinks over a sustained period of time, rather than growing normally.

It takes two consecutive quarters of decline for economists to qualify a downturn as recession.

The services and construction sectors were the key drivers behind marginal growth.

The services sector grew output by 0.2%, which went up to 1.1% for construction.

Meanwhile, growth has been "easing" in the science, retail and health industries.

The UK's recovery from the fallout of Covid has also been revised down in the ONS' latest figures.

"The level of real GDP is now estimated to be 0.2% below where it was pre-coronavirus at Quarter 4 2019, downwardly revised from previous estimates of 0.6% above," the ONS said.

It comes as the UK's financial markets have taken a battering this week after new prime minister Liz Truss and Chancellor Kwasi Kwarteng revealed a tax cuts bonanza in the mini Budget.

The value of the pound tumbled after the swathe of tax cuts were revealed, as concerns were raised about soaring government debt.

Analysts started predicting that inflation could hit a whopping 6%, sparking mortgage chaos.

Lenders pulled 900 mortgage deals in one day, and households were warned that mortgage bills could rise by thousands of pounds.

Today, the value of the pound against the dollar is $1.05 - earlier this week it collapsed to an all-time low of $1.03.

This recovery will most likely be down to measures that the Bank of England took to calm the market.

The Bank bought government bonds on Wednesday to stop several pension funds going bust, which would have had a catastrophic effect on Brits' private pension pots.

Experts have raised concerns that there could be more trouble in store for the markets as a result of the fallout of the mini-Budget.

What is a recession and what does it mean for your finances?

Recessions are worrying because they tend to lead to unemployment and wage stagnation.

This consequently means the government gets less tax, which could mean cuts to services and benefits, or that rates go up.

There are lots of different reasons why a country may head into recession.

The UK last went into recession in 2020 due to the coronavirus pandemic, and there was a more severe one in 2008/9 when the global financial crisis hit.

Going into recession can have a big impact on your finances and job losses are common as companies let people go to cut their costs and stay afloat.

Job losses are common, as companies try to cut their costs to stay afloat.

The number of people in debt and arrears is also likely to soar, and there could be more defaults on loans and mortgages or repossessions and bankruptcies.

There are some things you can do to shore up your finances if you're worried about recession.

Tracking your monthly outgoings, making a note of the date that bills are paid and looking for areas to cutback is a good first step.

Use a benefits calculator to see if you're entitled to any extra help. Millions of people qualify for cost-of-living payments of up to £1,700 – find out what you can get.

If you are behind on bills, speak to your providers.