The UK avoids a recession, but for how long?

While positive, the latest UK GDP figure was below expectations and the UK is likely to face more challenges this year.

12 September 2022

Before we get too excited that the UK has avoided a recession by posting 0.2% growth in July (against a 0.6% decline in June), we should also consider that this was below expectations of a 0.3% advance. Industrial production and construction both shrank for a second consecutive month as energy supply issues dominated. It feels like a recession bullet may have been dodged temporarily, but there are plenty more salvoes coming in over the remainder of the year, and likely only a matter of time before a recession is confirmed. A further rise in inflation in this month’s reading will keep pressure on the Bank of England to act again – which is hardly a good set-up for a pro-growth environment. In our view, a minimum hike of 50 basis points (bps) is expected, but 75 bps – which seems to be “de-rigeur” for central bankers at the current time – cannot be ruled out.