Yahoo Finance The Queen's death could tip UK into recession
The death of Queen Elizabeth II and another bank holiday for her funeral next week could tip the UK economy into recession, analysts have warned.
The bounce back of 0.2% in July followed a 0.6% slump in gross domestic product (GDP) in June, which was triggered by an extra public holiday to mark the Queen's Platinum Jubilee.
Figures from the Office for National Statistics (ONS) on Monday showed that the growth rate has lost momentum as rising costs hit businesses and consumers.
An additional day off for workers on 19 September will mean that the UK will have had two more public holidays than usual in 2022.
Analysts at Nomura and Deutsche Bank (DB) have warned Britain's economy could fall into a technical recession as output rose 0.2% in July, below economist's expectations for 0.3% growth.
Read more: Pound gains against falling dollar as UK growth slows
Economists at Pantheon Macroeconomics anticipate the funeral bank holiday will hit September GDP by 0.2%.
"Looking ahead, the extra public holiday for the queen's funeral on 19 September has the potential to be more damaging for the economy than the extra day off for the Jubilee in June," Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said.
"That said, many businesses will be able to catch up work, as most of them did in June."
"That suggests that a technical recession — widely defined as two quarters of declining GDP — is hanging in the balance."
It comes as inflation soared to 10.1% in July, hitting real incomes and profits. The Bank of England (BoE) has forecast inflation running at a 40-year high to keep surging this year, peaking at above 11%.
The BoE also expects the economy to enter a recession by the end if the year, even with prime minister Liz Truss's package of measures to freeze further rises in energy bills.
Read more: UK economy grows slower than expected as higher prices hit growth
"The feeble 0.2% bounce back in July was driven by weak GDP in June due in part to the loss of working days from the Jubilee long weekend," Yael Selfin, chief economist at KPMG UK said.
"More concerning, July's GDP remains below the level seen in May, pointing to an overall contraction over the first two months of summer.
"This ties into a downbeat outlook for the UK economy which could see another shallow recession from the end of this year, driven by the ongoing squeeze on households’ income and a rising cost burden for businesses."
