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.

Comments

Why do Share prices go up and down?

Shares are bought and sold on a Stock Market, and just like any market, prices can move around quite a lot. Imagine you are shopping for some of your favourite apples at the local Fruit Market. But sadly lots of other people like these apples too. The savvy Fruit Trader knows how delicious they are and realises he will have lots of buyers today, so he sets a high price. The first 5 sell out very quickly so he increases the price for the rest, pushing the price higher. This is the same for Shares. Through research or ‘gut feeling’ people will decide if they want to buy a particular apple Share. If they feel someone is selling them cheaply then they will buy them, pushing the price higher. If they think the particular Share looks expensive they will choose to buy something else, leaving the Trader to lower the price of his Shares so he can sell them. It is very difficult to work out what a Share is worth as there are many different things that can impact a price. This is why Shar

What are Dividends in Stocks and Shares?

A Dividend is simply a profit share. If you own Shares in a company, and the company is profitable, typically once a year they will transfer some money into your account, this is called a Dividend. This Dividend is your share of the company’s profits, and you can withdraw and spend it however you wish. Let’s imagine your neighbour Suzy wants to open a Lemonade Stand. She needs some investment to buy lemons, so being a shrewd investor, you offer to give her £100 in exchange for half her company (the Shares) and half of any profit she makes (the Dividend). Suzy has a busy week and sells lots of Lemonade, after buying enough Lemons for next week she is left with £20 of profit. She gives you £10 (the Dividend) and she keeps the other £10. You still own half her company, and you will keep receiving half of the profits every week. In large companies the Directors may decide not to pay all their profits in Dividends, instead choosing to reinvest to buy new machinery, or grow the business. B

What are Stocks and Shares for beginners?

To be honest it is quite acceptable to use the words Stocks and Shares interchangeably and nobody will bat an eyelid. In reality though, Shares represent a fraction of the companies Stock. But what does that really mean? Imagine Bitesized Money Inc is a bag of 100 marbles (the Stock), and everyone that owns one of the marbles owns 100 th of the company (a Share). They benefit when the company makes money, they collectively vote when big decisions need to be made, and they share the pain when the company loses money in hard times. In simple terms this is how Shares work, when you buy a Share, you are buying a part of a company. What should you pay for one of their marbles Shares? Well that is the tricky question and why investing is fun, but also carries some risk. Generally when a company is doing well, or people think it will do well in the future the price goes up, and when its future doesn’t look so good the price will go down. Company Shares are traded on a Stock Market, and pe

Bitesized Money

Search This Blog