By- Halima Afroz Lari (1920237)

INTRODUCTION
 A recession is a macroeconomic concept that denotes a substantial drop in overall
economic activity in a specific area. It was previously described as two consecutive
quarters of economic contraction, as measured by GDP and monthly indicators such as an
increase in unemployment.
 A recession, according to the NBER (National Bureau of Economic Research), is a
substantial drop in economic activity across the economy that lasts more than a few
months and is reflected in real GDP, real income, wages, industrial output, and
wholesale-retail sales.
 Recessions often result in systemic changes in the economy as weak or outdated
companies, markets, or innovations struggle and are swept away; drastic policy responses
by government and monetary authorities, which can literally rewrite the rules for
businesses; or social and political upheaval as a result of mass unemployment and
economic hardship.

Recession in UK

 Beginning in the first quarter of 2008, The United Kingdom (UK) was hit by the
consequences of the Great Recession. Overall, the nation's dependence on the financial
sector can be blamed for the initial mass impact. In reality, after partially stabilizing in
2009, the country experienced a double-dip recession from 2010 to 2012, and is still
dealing with some of the consequences.
 Over the course of the time, GDP of UK dropped by an estimated 7.2 percent.
Unemployment soared for a while, but then started to decline two years later. There was
also a huge deficit, which was the difference between what the government collected in
taxes and what it spent on public services. As a result, the national debt almost doubled,
and a decade-long austerity program was implemented. With the exception of health,
education, and humanitarian assistance, all aspects of government expenditure were
drastically reduced.
Effects of Covid-19 on recession in UK

 The economy has entered a technical recession after a record drop of 20.4 percent in
Quarter 2 (April to June) 2020, following a major shock after the start of the corona virus
(COVID-19) pandemic; this follows a 2.2 percent drop in Quarter 1 (January to March)
2020.
 UK's corona virus-ravaged economy contracted by 9.9% in 2020, the largest drop in
production in more than 300 years, but it avoided slipping back into recession at the end
of the year and appears to be on track for a rebound in 2021. Official figures showed that
gross domestic product (GDP) increased by 1.0 percent from October’20 to
December’20, exceeding the estimates of a group of economists polled by Reuters. Even
though the economy is expected to contract in early 2021 due to the consequences of a
third COVID lockdown, this makes it likely that UK will avoid two consecutive quarters
of contraction - the traditional description of recession in Europe.

Recession is categorized by:

 Borrowing by the government is increasing: For the government's economy, a recession

is bad news. Lower tax receipts (lower income tax and corporate tax revenues) and higher
government spending on unemployment insurance are the results of a recession. The UK
is expected to borrow £60 billion in 2009, and a recession could exacerbate this
borrowing. In the future, this borrowing would result in higher taxes and interest
payments.
 Share Prices are Declining: In general, a recession results in reduced profits and
dividends. As a result, stocks are less appealing. It's worth noting that stock prices always
collapse in advance of a recession. For example, recent share price declines are primarily
due to investor expectations of an impending recession. During a recession, stock prices
often rise in expectation of the economy's recovery.