The Bank of England has warned the UK is facing the longest ever recession. Here's what it means

The Bank of England has warned that the UK faces its longest ever recession, as it raises interest rates by the highest amount in 33 years.

The recession could last into 2024, bringing a host of associated economic problems.

But these can often feel quite abstract. So we’ve broken down what it all means.

What is a recession?

A recession is defined as two successive quarters of negative GDP growth. Essentially, it’s six months where the economy shrinks.

The Bank of England has said the UK is already in a recession.

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Inflation should fall from the middle of next year

The bank said inflation would remain at over 10 per cent in the “near term”, but begin to “fall sharply” from mid-2023 as interest rates rise. Inflation could fall to below two per cent in the following years.

But bear in mind inflation falling does not mean prices fall – they’re still going up, but just by slightly less.

Unemployment is expected to shoot up

Unemployment currently sits at 3.6 per cent. But as the economic situation worsens, this is expected to shoot up.

The Bank of England forecasts it will rise to 6.5 per cent.

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Increases in mortgage costs may be passed on to tenants – putting more people at risk of homelessness

Soaring interest rates mean higher mortgage costs for many homeowners. For landlords with mortgages, these will likely be passed on to tenants.

This could put many at risk of homelessness, warns Rebecca McDonald, chief economist at the Joseph Rowntree Foundation.

“With interest rates reaching their highest point for a generation, people who are already in poverty could be pulled in deeper due to the cost of getting into expensive debt to afford essentials. There is also a larger group of people at risk of being pulled into poverty due to the impact that rate rises have on housing costs,” McDonald said.

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