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What is a recession in the UK?

 


The common definition of a recession in the UK is when the economy shrinks for two quarters in a row. So if the Gross Domestic Product (GDP, more on that in another article but it is basically how many goods and services UK workers have made during that time) shrank from January to March, and then again from April to June, then the UK would be considered to be in a recession. So it is always a bit of a measure of what has happened in the past, as it is looking back at months that have already happened.

If we think of Suzy’s Lemonade Stand as a representation of the economy. Imagine if in the October to December quarter of the year she made and sold 200 cups of delicious lemonade, she was very happy! Then sadly over the New Year a few of her neighbours lost their jobs so they could only afford to buy Lemonade from Suzy occasionally. Because of this she only sold 180 cups of her Lemonade in the January to March quarter, then only 150 cups in the April to June quarter of the year. Times are tough all around, and the amount of Lemonade she made and sold has been going down. If this happens to the whole of the UK, then we can say the UK is in recession.

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