Key Takeaways:
- Goldman Sachs has lowered its 2022 UK GDP forecast from 3.7% to 3.5%
- UK firms saw a 424% rise in gas costs and a 349% increase in electricity bills since February 2021
- An increasing number of UK citizens rely on Food Banks to survive
YEREVAN (CoinChapter.com) — Goldman Sachs Group, one of the leading investment banking firms, expects the UK economy will slip into recession in the fourth quarter (Q4) of 2022. The prediction comes amid soaring energy costs and growing inflation.
Moreover, the investment management giant cut the UK’s gross domestic product (GDP) forecast for 2022 from 3.7% to 3.5%. This is a further cut from predictions made earlier this year. In the spring of 2022, another UK-based forecasting group, the EY ITEM Club, predicted a GDP growth of 4.1%. It later reduced this number to 3.7% in its July report.
The country’s GDP could also witness a fall of 1% until mid-2023. As for the annual output next year, Goldman Sachs expects it to fall to 0.6%, a steep decline from its earlier estimate of a 1.1% expansion.
“Concerns around cost-of-living pressures in the UK have continued to intensify on the back of the worsening energy crisis. Real consumption is still likely to decline significantly,”
the report stated.
UK hit by energy crisis as Goldman Sachs predicts disaster
With a gross domestic product (GDP) of $3.320 trillion, the United Kingdom has the sixth-largest economy in the world. Nevertheless, it risks facing a humanitarian crisis.
Energy shortages in the country have become a large threat. According to the country’s regulator, British energy bills will jump 80% to an average of 3,549 pounds (about$4,188) from October 2022.
Data from the Federation of Small Businesses (FSB) reveals that firms have seen a 424% rise in gas costs and a 349% increase in electricity bills since February 2021.
Many small business holders are already raising the alarm in fear that they may not be able to survive the winter.
As CoinChapter reported, increasing energy costs in the UK have ignited a grassroots-level campaign. One group, called Don’t Pay UK, threatens a bill payment strike on October 1 if it reaches one million pledges on its website.
As a result of the latter’s invasion of Ukraine, Europe’s sanctions on Russia have become a huge financial burden on people.
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UK Citizens turn to food banks amid recession fears
Amid growing global price hikes, citizens in the UK are feeling the heat. Over 15 million people in the country are expected to experience fuel poverty when they spend over 10% of their net income on fuel.
According to Southampton-based family researcher Liz Chater, demand for food banks and charitable centers has increased. As a result, people from all walks of life, struggling to make ends meet, rely on them more.
“The increase in energy bills is a very real worry. People are already chosing between eating and heating, and winter isn’t here yet,”
Chater told CoinChapter.
As per a May 2022 survey by the Independent Food Aid Network (IFAN), 93% of organizations representing food banks in the UK reported an increase in the need for their services since the start of 2022.
Before the outbreak of the Covid-19 pandemic (2019-20), around 2.5% of all UK households (700,000) used a food bank, according to the Trussell Trust State of Hunger report.
With the crisis likely to only worsen as winter approaches, outgoing Prime Minister Boris Johnson’s successor will have a lot on their plate to revive the UK economy.
