UK dodges recession as economy grows 0.2% – what it means for your finances

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File photo dated 26/01/18 of a UK five pound, ten pound, twenty pound and fifty pound notes with one pound coins. There are 520 fewer "Isa millionaires" following a period of global stock market volatility, according to the latest annual figures. HM Revenue and Customs (HMRC) revealed the dip following a Freedom of Information (FOI) request by InvestingReviews.co.uk. Issue date: Thursday September 1, 2022. PA Photo. Figures from the revenue body showed millionaire numbers fell by just over a quarter to 1,480, down from 2,000 the previous year. See PA story MONEY Millionaires. Photo credit should read: Dominic Lipinski/PA Wire

THE UK economy grew by 0.2% in July, latest figures from the Office for National Statistics show.

The most recent Gross Domestic Product (GDP) data indicates the UK economy is on the up after slowing in June.

The UK economy grew in July, according to the latest ONS data

The services sector grew by 0.4% in the month, after a 0.6% fall in June and was the main reason GDP grew.

The information and communication sector grew by 1.5% as well.

The production sector however shrunk by 0.3%, as did construction, which dropped by 0.8%.

Consumer-facing services grew by 0.6% in July, after flat growth in the previous month.

However, the sector remained 4.3% below pre-coronavirus levels.

The ONS said GDP was flat in the three months up to July compared with the previous three months.

The latest figures mean the economy is growing rather than shrinking.

British Sterling held up well against the US Dollar following the announcement.

It comes after it hit an over 30-year low against the Dollar as Liz Truss introduced new measures to tackle soaring energy bills.

The new Prime Minister has frozen energy bills for two years, with the typical family expected to now pay £2,500 a year from October.

Alice Haine, personal finance analyst at Bestinvest, said: “With the two-year freeze in energy bills saving households £1,000 a year, the UK is expected to suffer a much milder recession than previously forecast, with inflation likely to peak in the fourth quarter several percentage points lower than feared.

“While the Bank of England is still expected to increase the base rate at its next Monetary Policy Committee meeting – which was delayed until September 22 following the sad death of Queen Elizabeth II – it is hopeful that runaway inflation will be contained.”

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

A country is in recession if it experiences a period of economic decline over a sustained period – usually if GDP contracts for two successive quarters.

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.

Don’t be tempted to take on more debt, unless it’s an emergency. Consider moving to a balance transfer credit card which charges 0% interest for a fixed period.

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. Helen Morrissey, an analyst at Hargreaves Lansdown, said: “Don’t suffer in silence. If you are struggling, it’s important to seek help as soon as possible.”