Hold the front page! The United Kingdom has entered a recession – our economic turmoil continues! Is it time to sack the government and stuff all our worldly possessions under our mattresses?!

…and back to reality. The UK has entered a recession which is obviously not great news but does it really matter?

In simple terms, a recession is where the GDP (gross domestic product) of a country shrinks for two consecutive quarters (six months) with GDP being the measure of all the goods and services a country produces.

A recession isn’t a particularly great situation to be in as it decreases confidence in consumers, businesses and investors which leads to a reduction in spending and investment which in turn causes higher unemployment.

However, these effects normally take a prolonged period of time to materialise – they don’t announce a recession and suddenly cut jobs. In my opinion, I think that the effects of this recession will be less pronounced given the economic struggles that have been faced due to the cost of living crisis: businesses having been operating in tough conditions for two years now, it’s just officially been proclaimed a recession today.

The current recession has been caused by a drop in consumer spending (particularly around Black Friday), doctors’ strikes and a fall in school attendance. Now the first two are a consequence of the cost of living crisis and inflationary pressures which the Bank of England is trying to sort out (although maybe not doing a decent job at it) and school attendance isn’t exactly a great indicator of economic performance.

So what does all this mean for your personal finances?

Absolutely nothing. Just because we’re in a recession doesn’t mean anything will suddenly happen to prices or wages.

In the medium to long term, there is likely to be a fall in the base rate due to inflation beginning to fall and also the need for consumer spending to rise so we don’t stay in a recession.

However, the recession will pose a headache for a certain Rishi Sunak who promised he would grow the economy and a recession is the exact opposite of that. Admittedly the economy grew 0.1% in the whole of 2023 but it’s still not a great position to be in going into an election year.

Long story short, given the circumstances of the previous years entering a recession now isn’t a cause for panic or alarm (unless you’re Rishi) and your personal finances aren’t under threat.

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Do comment your thoughts below.