So, the UK is officially in a recession. The thing that many predicted but we had hoped wouldn’t happen, has. But what does the UK recession 2020 mean and what can you do about it?
In short, a recession is where the GDP has fallen for two quarters in a row. GDP stands for Gross Domestic Product and it measures the economic success of a country. Some of the factors used to measure this are spending and export value. Spending in terms of business and personal is a big factor when measuring GDP. When things are going well, GDP goes up. When things aren’t, it goes down.
Figures show that between January to March 2020, GDP fell 2.2%. That doesn’t seem too bad, right? But, between April and June, it fell 20.4%. This recent figure is the biggest GDP fall on record for the UK. Suddenly, not so good! Based on figures, the UK recession is definitely here.
What does that mean for your money?
The first thing to be wary of when it comes to a recession is job losses. Unfortunately, with reduced output and spending, it can mean that losing your job might be on the cards. The Bank of England predicts that unemployment will double by the end of 2020, which is not a great though at all! But, this will depend on the sector you work in. Job losses will be more prevalent in certain industries that others.
Another thing that might impact you is that there will probably be another credit crunch. Which essentially means that being able to borrow money will be more difficult. This is already being seen in the reduction of 0% deals, 90% + 95% mortgages are being withdraw and stitcher lending criteria are being put in place for certain groups. This includes the self-employed and first time buyers. If you’re a first time buyer, you might find it more difficult to get a mortgage offer than it has been previously.
Negative interest rates might also come into play, if this recession goes on for a long time. This would have a hug knock on effect on savings. Now, interest on savings is really poor at the moment anyway, but if negative interest rates were introduced, in theory the bank could charge you for keeping savings with them. The moneysavingexpert site has a lot of information on the best savings accounts at the moment.
What can you be doing with your money to recession proof it?
There are four things you can be doing at the moment to try and make your money more secure in these uncertain times.
The first thing for you to be doing, if possible, is building your emergency fund. If job losses are looking, then you need to try and get your emergency built up so you can cover that in the immediate term, if you need to. Even if you can get one month of your fixed expenses saved, then it gives you a bit of breathing room. Try and add money if you can. Remember, an emergency fund needs to be in an easy access account that you can get too quickly. This video here gives some examples about how to save money fast.
Secondly, go over your budget carefully. If you don’t already, begin to track your incomings and outgoings. I use my budget planner for this, so find a method that works for you. Either way, this will give you the knowledge into your own spending habits and where you can cut things back, if needs be.
Another thing you need to do is to prioritise spending. If you need to be saving more money into your emergency fund, then maybe cut back on this little splurges and send that money to your emergency fund instead. It’s all about being mindful about your spending at this time. This video talks about how to make subtle changes in your budget for the better.
Finally, look for other opportunities to make money at home. There can be many different options for making money at home. If you are worried about losing your Jon, then definitely look at trying to bring money in from other sources. This video shows how you can make £15+ an hour from home.
When we will get out of this recession?
Truth is, no one knows. Experts have predicted that it might take until 2024 for the economy to be back to pre-COVID levels, but no one can say for sure. This depends on whether things slowly return back to what they were. If there is a second wave, then it could be a lot longer.
So the recession is here in the UK. Here are some steps to help you with your finances at this time.
Have you got any other tips? Leave them in the comments below – I’d love to hear from you!
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Interesting thoughts but there are also a lot of upsides to a recession and negative interest rates that can really help, so for balance maybe cover those too?
Very helpful list, I also found using a budgeting app very helpful.
I really hope the COVID period will be soon gone and the whole world will come back to normality.