UK ‘at the precipice of recession’, the IPPR have warned

The Institute for Public Policy Research (IPPR) have warned that the UK is at high risk of being pushed into a recession in response to high interest rates, where they state that the Bank of England ‘has been forced to take action because of government inaction’.

The think tank said that the expected rise in interest rates threaten a recession as they sit at a 15-year high of 5.25%, and are forecasted to reach 6% by early 2024.

Yesterday, the Office for National Statistics (ONS) reported that inflation has fallen from 7.9% to 6.8%, stemming Ofgem’s decision to alter the energy price cap last month which made electricity and gas cheaper.

What is a recession?

A recession is defined as two consecutive quarters - six months - of negative growth. The UK has not had this so far, having had periods of zero growth rather than negative growth.

IPPR’s Dr George Dibb said: “It’s good news that headline inflation is lower, especially with energy bills coming down, but there is a very real risk that a recession may soon overtake price rises as the main economic concern.

“Other countries have brought inflation under control quicker than in the UK, with more support for households and workers avoiding unnecessary pain.”

Growth in wages also adds an element of impact to this, as pay grew by 7.8% in the three months to June, it was announced yesterday. This may make the Bank of England increase base rates (the interest rate that a central bank – such as the Bank of England – will charge commercial banks for loans) which would increase costs in other areas such as mortgage and rental payments.