The UK is facing its first so-called ‘double dip’ recession in almost 50 years, with borrowing set to hit £450 million.
Economists warn that the latest coronavirus restrictions may cost the country £400 million every working day.
What is a double dip recession?
A double dip recession refers to an economic decline, followed by a short lived recovery, followed by another decline.
Double dip recessions can come about due to a variety of factors, and often involve prolonged unemployment in a county and low Gross Domestic Product (GDP)
The UK last faced a double dip recession in 1975, when the banking sector was hit by crisis, and strikes took place across the country. Inflation hit 24.2 per cent during the recession, having a costly effect on the consumers.
The Covid-19 pandemic forced the UK into its first recession for 11 years during August of last year. The economy has shrunk by 20.4 per cent compared with the first three months of 2020.
Why is the UK forecast for a double dip recession?
A survey from the British Chambers of Commerce found that nearly half of all firms saw their sales fall in the final months of 2020, with the hospitality and catering sector rising to 79 per cent.
Borrowing is set to continue in the UK, with chancellor Rishi Sunak announcing a new £4.6 billion plan to help businesses through the new lockdown. This will include a one-off top up grant of us to £9,000 for retail, hospitality and leisure venues.
Output in the country is also forecasted to reduce, with group Oxford Economics saying it is likely to shrink by more than four per cent in the first three months of 2021.
The UK’s GDP, which is the total value of goods produced and services provided in the country during one year, was previously predicted to be 6.2 per cent for 2021, but is now forecast for 5.5 per cent.
Forecasting group, the EY Item Club, had made the estimate, with Howard Archer saying the latest nationwide lockdown has given the economy a challenging start to the year.
He said: “With restrictions now in place in most areas of the UK, the EY Item Club expects the economy will have a challenging start to 2021 and will likely see modest contraction in the first quarter.
“This would result in a double dip recession.”
The UK was thought to be having a minor economic bounceback in the third quarter. Lockdown restrictions had eased in June, and the Chancellor introduced the Eat Out To Help Out scheme, which encouraged people to spend money in restaurants.
However, the winter period caused the economy to shrink, with tougher lockdown restrictions coming into effect in November.