UK economy flatlines as recession fears grow – what it means for your money

THE UK economy could be heading for recession after new statistics revealed it flatlined between July and September.

Data from the Office for National Statistics (ONS) reveals Gross Domestic Product (GDP) showed no growth across the three months.

A healthy economy is one where GDP is growing but if it stalls or is falling, it's bad news for businesses and consumers.

If GDP drops for two consecutive quarters it is defined as a recession, which leads to job losses and wages stalling.

The UK last went into recession in 2020 after the coronavirus pandemic hit, shutting down large parts of the economy.

The latest figures from the ONS come after GDP increased by 0.2% between April and May.

Experts said the latest figures could be partly blamed on wet weather and industrial action in the summer.

Flatlining GDP could also be down to soaring borrowing costs and stubbornly high inflation, which sat at 6.7% in September, they said.

GDP increased by 0.2% in September following growth of 0.1% in August.

However, across the three months it remained flat, with a 0.1% fall in the services sector offset by a 0.1% increase in the construction sector.

Across the same time frame there was flat output in the production sector.

Darren Morgan, director of economic statistics at the ONS, said: "The economy is estimated to have shown no growth in the third quarter.

"Services dropped a little with falls in health, management consultancy and commercial property rentals.

"These were partially offset by growth in engineering, car sales and machinery leasing.

"There were also small growths in manufacturing, led by cars and metal products, while construction grew due to new commercial property work.

"In the month of September the economy grew slightly, with increases in film production, health and education.

"This growth was partially offset by falls in retail and computer programming."

Alice Haines, personal finance analyst at Bestinvest, said the "dismal" latest quarterly figures could reignite fears the UK economy is heading for recession.

This would have "devastating consequences for people’s finances", she added.

It comes after the Bank of England (BoE) also warned of a recession risk in the run-up to the expected general election next year.

Meanwhile, the British Retail Consortium and Barclays this week said retail sales were down in October, signalling households are cutting spending ahead of Christmas.

The UK could already be in recession, according to analysis by Bloomberg Economics, as interest rates soar and households rein in spending.

The official figures from the ONS on economic growth are backwards looking, which means they are for previous months rather than real-time.

The BoE recently signalled it intends to keep its base rate, a measure used to control inflation, high for an extended period.

It most recently held the rate at 5.25% after consecutive rises, but inflation still remains stubbornly high, meaning the cost of everyday essentials is rising.

Emma-Lou Montgomery, associate director for personal investing at fidelity international, predicted it might not be until next August when the base rate would start to come down.

She added: "That means we’re still in uncertain territory for some time yet and that won’t be good news for retailers who badly needed the forthcoming festive spending season to be one that boosted the coffers."

What does it mean for your finances?

Today's figures mean the economy isn't growing or shrinking, but after near zero growth in the previous quarter, it could mean recession is coming.

In a recession job losses are common, as companies try to cut their costs to stay afloat.

Businesses may also go into administration or go bust.