Goldman Sachs’ Chief European Economist Sven Jari Stehn wrote in his latest research note that the UK economic recession is likely to be deeper than previously forecast.

Key quotes

“The country is likely to have a four-quarter cumulative fall in the gross domestic product (GDP) of 1.6%.”

“The profound economic challenge the UK is facing is effectively the combination of the cost-of-living crisis, high inflation, a recession setting in and then navigating the fallout from this fiscal U-turn for the public finances.”

“Cumulatively, we expect real GDP to decline by about [1.5%]… that’s relatively small compared certainly to COVID-19 or the financial crisis, and a bit more like shallow recessions.”

“The reason for that is that there is still fiscal support via the energy price cap and household have excess savings that they’re setting on, and that they can use to offset some of the shock.” 

“The risk is still towards a sharper downturn.”

“While the energy markets may have stabilized, there is still a risk that gas supply will run out and that rationing might happen during winter, although that risk is lower in the UK than in the Euro area.”