The UK economy slipped into recession in the last three months of 2023, official figures show.
However, the Bank of England has since suggested that the downturn may already be over.
Chancellor Rishi Sunak said economic growth was one of his five key priorities.
How do you measure the health of your economy?
The Office for National Statistics (ONS) publishes figures for the UK's Gross Domestic Product (GDP). This is the value of all goods and services produced by the UK.
In normal times, a country's economy grows, its GDP increases, and as a result its average income increases.
However, sometimes the economy shrinks and GDP declines, which is a sign that economic conditions are getting worse and can hurt people's pockets.
What is a recession?
The UK is in recession when GDP falls for two consecutive three-month periods, called quarters.
The latest ONS figures confirm the economy contracted by 0.3% between October and December 2023.
Throughout 2023, the UK economy grew by 0.1%.
The goal will be achieved if the economy expands in the fourth quarter of 2023 compared to the previous quarter, reporters were told at a private conference. ONS figures show that was not the case.
When was the last time there was a recession in the UK and how long did it last?
The 20.4% decline in GDP recorded between April and June 2020 was the largest on record, but it lasted only six months.
The last recession began in 2008 due to the global financial crisis and lasted five quarters, or 15 months.
What happens when there is a recession and how does it affect me?
Economic growth means more jobs are available and companies can pay their employees and shareholders more.
Higher wages and bigger profits also generate money for the government through taxes.
These situations can reverse if the economy contracts and the country goes into recession.
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Some people may lose their jobs, and the unemployment rate may rise. Graduates and school dropouts can find it difficult to land their first job.
Some people may find it difficult to receive promotions or pay increases large enough to keep up with rising prices.
However, the pain of a recession is usually not felt equally across society, and inequality can increase.
Benefit recipients and those on fixed incomes are likely to suffer particularly, especially if governments decide to cut spending on public services.
How can we get out of the recession?
This allows businesses and households to borrow money more cheaply, boosting spending and economic growth.
If an economy struggles to grow and at the same time has high inflation rates, a situation called “stagflation” can occur.
This is very difficult to solve because the two problems require different solutions.
How does the UK economy compare to other countries?
This puts the US overall at 2.5% compared to 2023, the best performance among other developed countries. It is expected to outperform other G7 countries in 2024.
