UK is on the brink of recession

The economy contracted between July and September confirming , for the first time in 16 years, that the UK is on the brink of recession. Indeed, the UK will be classed as being officially in recession if the economy slows in the fourth quarter as well.

Economic output fell by 0.5%, according to the Office for National Statistics, a bigger-than-expected drop, hitting UK shares and weakening the pound. It is the biggest drop in UK gross domestic product (GDP) since the first quarter of 1990.

The 0.5% fall has increased expectations of further interest rate cuts from the current level of 4.5% to stop the slide. Rates could go as low as 3% by the middle of next year and possibly even lower, stated a UBS analyst.

Global slowdown

The slowdown in the UK comes as fears of a global recession ravage financial markets around the world. Ireland is already in recession, France is close to recession and the US – the world’s largest economy – is  now believed to be in recession.