Since inflation is expected to reach double digits in the following months, THE BANK of England has warned that the UK may enter a recession this year. According to a financial expert, Brits are being told to “save money away” immediately to help with the impact.
The Bank of England has been increasing base interest rates to control prices as inflation rates have surged to a 40-year high of 9.4 per cent as of June and are only anticipated to rise further. The Bank predicts that the UK will experience a recession in the fourth quarter of the year; thus, current steps don’t seem adequate to stop one.
The Russian-Ukrainian war, which puts strain on gas and oil supply systems and a series of Covid lockdowns, is mostly to blame for the economic crisis.
The Bank raised interest rates to 1.75 % at the start of August, the sixth hike of the year and the biggest since 1995, to bring inflation rates back to the two per cent target set for two years.
Even so, the energy bill price cap is anticipated to increase by an additional 24 % in October, causing inflation rates to reach as high as 13 % by the end of the year.
British citizens’ “real term” income is falling due to wage growth that is not keeping pace with inflation.
The bank has predicted that the UK would enter a recession by the end of the year.
A financial expert has advised getting ready to build a buffer for this period because it may significantly impact many people’s livelihoods and pockets.
What Exactly Is A Recession, And What Can You Do To Safeguard Yourself Against One?
When economic activity declines for several months or even years, the term “recession” is used.
A recession is deemed to be in effect when a nation suffers a decline in retail sales, an increase in unemployment, and a sustained period of harmful gross domestic product, according to Laura Rettie, editor-in-chief of Finance.co.uk.
For Me, What Might A Recession Mean?
Individuals may lose their jobs during a recession as a result of businesses being unable to sell their goods, and it may be challenging to find employment as a result of the large number of people who will also be unemployed.
During the crisis of 2008, the unemployment rate in the UK peaked at 10%.
If you continue working, Ms Rettie warned, “Your employer may decide to lower your pay or limit your benefits.”
Those wanting to obtain a loan or a mortgage may also be impacted.
Ms Rettie stated: “Historically, lenders have tightened their eligibility requirements for items like mortgages and loans as more individuals become unemployed and unable to pay their payments, so you’ll need a solid credit score to be able to borrow.
“If you’ve invested in stocks or real estate, those can cause you to lose money.”