Experts say the UK recession is likely to be deeper, but no longer than previously expected.

Experts say the recession the UK is facing could be twice as bad as previously thought.

Faced with a worsening situation, government cuts and higher taxes, economists at the consulting firm EY thought each of the next three years could be worse than they expected in the past.

Three months ago, EY’s Item Club predicted that gross domestic product (GDP) would contract by 0.3% this year, then 2.4% next year and 2.3% in 2025.

But an updated outlook released on Monday, Jan. 23, projects a contraction of 0.7% this year, followed by growth of 1.9% and 2.2% over the next two years.

Hywel Ball, Chairman of EY UK, said: “The economic outlook for the UK turned bleaker than forecast in the fall and the UK may already be experiencing one of the most anticipated recessions in living memory.”

However, EY said that while the recession may be deeper than previously thought, it will not necessarily last longer than previously thought.

Andrew Bailey said last week that the pandemic and the cost-of-living crisis mean a recession is yet to come.

The Governor of the Bank of England added that the most likely outcome for the UK economy would be a prolonged, flat recession with a feature of “weak activity for quite a long period of time”.

He said the recent drop in energy prices meant “more optimism” about an “easier exit” from the current inflationary crisis, which currently stands at 10.5%, well above the bank’s 2% target.

It is still unclear whether the country is already in recession, which is defined as a two-quarters consecutive decline in GDP.

The economy was already shrinking in the third quarter of last year, but the latest GDP data showed the economy unexpectedly expanded in November, meaning some economists believe the fourth quarter could be positive.

Either way, economists say the UK is likely to slide into recession this year, contracting in the first half before returning to growth in the summer.

The recession is also likely to prove less devastating to the economy than it was in the 1980s, 1990s and 2000s, EY said.

Mr. Ball added: “The only positive is that although the recession will be deeper than forecast, it will not necessarily be longer.

“The economy is expected to continue to grow in the second half of 2023 and has avoided major new external shocks related to energy prices, Covid-19 or geopolitics over the past three months.

“Meanwhile, the main deterrent to last year’s activity – high and rising inflation – could ease as energy prices also fall.”

Economists are forecasting inflation to average 7.2% this year, including a big jump if the government’s energy program is cut by £500 from early April.