UK admits it entered recession and announces austerity plan

The British government has announced this Thursday a painful recipe to alleviate its economic crisis.

And it is that the Minister of Finance of the United Kingdom, Jeremy Hunt, affirmed that the country has entered an economic recession and that the nation suffers the highest inflation in 41 years.

The rise in prices stands at a rate of more than 11%, putting family economies and the British business ecosystem at risk.

The Office for Budgetary Responsibility (OBR) forecasts that the UK economy will contract by 1.4% next year, before recovering by 1.3% in 2024.

Many economists speak of a “technical recession” when the growth of the Gross Domestic Product (GDP) contracts for two consecutive quarters.

Earlier this month, the Bank of England already warned that the UK will face its longest recession since they began keeping records.

Against this background, Hunt announced a plan that contemplates a mixture of tax increases for citizens and companies, as well as an austerity program that involves raising public salaries below inflation and budget cuts.

The foreign minister said the plan wants to address the cost of living crisis and “rebuild our economy.”

The measures are intended to save the country some 54 billion pounds and shore up public finances, after recent political and economic turmoil in the country.

But many believe that these decisions will affect household income.

According to Hunt’s announcement, the UK’s national debt will be £400bn higher than forecast in March.

“The hope is that more sustainable public finances and lower inflation prospects provide scope for an eventual sharper economic recovery,” says Ben Laidler, global markets strategist at eToro.

“This budget involves a harsh combination of tax increases and spending cuts for a sum equivalent to 1.7% of GDP, in an attempt by the government to plug the country’s financial hole, affected by the recession and rising prices. financing costs”, adds the analyst.

“Recessions are never pleasant, but this one can be particularly painful. Official forecasts not only say that we are already seeing a contraction in economic activity, but that it will contract 1.4% next year,” explained the economic correspondent for BBC Dharshini David.

“A decade of prosperity gains will have been wiped out, hit by higher prices and mounting job losses expected to total more than 500,000,” he added.

Jeremy Hunt “has struck a delicate balance between short-term economic support – in the form of energy subsidies – and long-term fiscal sustainability,” says Silvia Dall’Angelo, a senior economist at Federated Hermes.

“For now, this is enough to convey the feeling that the current government is serious about fiscal sustainability issues,” he added.

Remember that you can receive notifications from BBC News World. Download the new version of our app and activate them so you don’t miss out on our best content.

BBC WORLD