The Downfall from the Most Powerful Nation
The United Kingdom has been the second most powerful nation in the world for several decades now. The Henry Jackson Society Geopolitical Index ranked the UK as the most powerful country globally. With almost every nation having a history of being the UK colony, history favors them too. However, the last few years are different. A dark cloud looms over the mighty United Kingdom. What began with Brexit in 2016 continues to this day in 2020.
What is a Recession?
Recession, by the economists’ definition, is when the economy continues to contract over two quarters of a financial year rather than growing. Recession could be in just one nation, a few countries, or the whole world around the same time. Experts say that recession is an important part of a business’s journey, although it impacts them severely.
The economy continues to flourish until it reaches it’s peak and then experiences a slowdown and hits rock bottom before growing again. While this is a normal flow, it tends to have a drastic effect on the life of everyone. The duration of a recession can greatly vary based on numerous factors. The longest one since 1945 is less than a year. However, studies suggest that expansionary periods could last for an average of 58 months or more.
The UK Recession
The recent blow to the nation has pushed it into a recession, with the GDP tumbling by a 20.4% low. This makes UKs economy worst hit than what the US and the Eurozone are battling with currently. Experts believe that this is the worst downward plunge since the first records available.
The closest comparable records available dating back to 1955. Economists consider two consistent quarters of GDP drip to be a qualifier of a recession, and the UK has been experiencing that since the start of this calendar year.
How it all began?
Recession could be a result of numerous factors. For instance, a single aspect of an economy collapsing could take the other aspects of it. This collateral damage could be a result of anything. For instance, the housing industry crashing with people losing their homes, banks struggling to get their money back, and thus causing a wider meltdown. Similarly, a crisis in the oil and natural gas sector could cause a meltdown too.
However, experts consider the 2020 recession to be of a different kind. Some recessions are caused by the Black Swan event, which is an unforeseen incident or event that leads to a recession. The COVID-19 crisis could be the Black Swan that led to a recession in the UK.
While the UK economy’s downfall began a few years ago with Brexit, the biggest blow was the pandemic. Coronavirus has put a halt on the development of nations across the world.
How Severe is it?
The 2008 global recession was believed to be the worst impacting recession of this century. However, experts believe that the UK could be worst hit than that, this time around. The UK’s GDP for Q2 is around 25 to 30 percent lower than it was in the comparative quarter in 2019. Economists suggest that the United Kingdom’s economy could be shrinking by something around 14 percent, if not more. And this considering the performance of the UK economy in the pre-COVID part of this year.
Is a Global Recession on the Cards?
The Global economy thrives in a mutually inclusive fashion, and that means the economy of one nation can massively impact that of another nation. And with a pandemic outbreak like coronavirus, the whole world has come to a halt. Every section of the society has hit the pause button, and there is not much business or money flowing into the system. This naturally slows the economy and could put a hold on the economic activities of the nation.
Since the COVID-19 outbreak, many countries have reported a slow down in the economy. China, the nation which has been the epicenter of the outbreak, has a decline in its economy, for the first time, in a decade. The situation being the same globally, the whole world might soon enter into a period of recession.
The Good News
While it takes a while for the economies to bounce back after a recession, this time around the scenario might be different. As the contracting economies are not a result of the market situation, the nations might bounce back to normalcy soon after the pandemic ends and economic activity resumes.
So, we could say that the whole nation could experience a financial crisis soon, but the impact wouldn’t be as severe or as long as it was in the past.