Bank of England expects UK to fall into longest ever recession

https://www.bbc.com/news/business-63471725

by belter • 4 years ago

207 195 4 years ago

hristov• 4 years ago

The craziest thing is that this recession was mostly self inflicted.

HL33tibCe72• 4 years ago

That’s unfortunately not true (it would be nice if it was, because that would imply that fixing it would be easier than it actually is). The idiotic decisions of the government did play a minor role, but the UK economy was already on the road to ruin before that happened.

bluepizza2• 4 years ago

I think OP means all of the idiotic decisions, from Brexit to all of the delusional politics that have achieved no actual economical advantages to the UK ever since.

substation132• 4 years ago

that would imply that fixing it would be easier than it actually is

I assume the self-inflicted part is leaving the common market / customs union... and rejoining this is not easy at all. I think it might be politically impossible for at least 10 years.

marvindanig• 4 years ago

Apparently the evangelical jehadis and MAGAts are likely gonna succeed towards a similar outcome here in the US. These people forget how much better western economies were before BREXIT and MAGA nuisance took over.

frereubu• 4 years ago

The way I look at it, there are many issues facing many economies at the moment. What Brexit did was remove any contingency that might have been available to ride out the storm.

mywittyname2• 4 years ago

World: If you jump off the cliff, it's going to hurt really badly.

England: Nah, everything will be so much better at that bottom of this cliff.

World: But that's a really high cliff, and you're talking about jumping off of it.

England: YOLOooooOOOOooo

Also England: These broken legs really hurt. I probably won't be able to walk for a while.

World: <Jackie Chan face>

pojzon• 4 years ago

Thank you for explaining it for younger audience, but I dont think many of them visit hackernews.

mrlonglong• 4 years ago

Nicked.

yodsanklai• 4 years ago

To play devil's advocate, I'm not sure (the rest of) Europe is much better off.

unity1001• 4 years ago

You described the process as something that was quite polite. It was more like they screamed, yelled at, smeared and insulted everyone who warned them. And when people informed them that the warnings started visibly coming true, they doubled down and declared everyone as an enemy.

Brexit process and its aftermath was a crazy, crazy case study, once in a lifetime observation opportunity for social sciences.

eloff• 4 years ago

Yeah, that about sums it up. I ended up holding a bunch of GBP, in an company in admistration (bankruptcy.) I'm getting a haircut on my haircut. If you made an inverse ETF taking the opposite side of my lifetime investment decisions, the performance would be stellar.

pessimizer4• 4 years ago

It's weird to see this stuff posted so much without anyone bothering to make a case for how Brexit caused this. Somebody just posts a "told you not to do brexit," which begins a thread of mutual congratulations and praise.

How did Brexit affect the US economy so badly at the same time?

pbhjpbhj• 4 years ago

People often blame England, but it was the whole of the UK, there were enclaves of opposition in all of the home nations.

Also, there were plenty of opposing voices in the UK (I realise we're party of the World, still!). Financial experts unanimously agreed it would damage our financial system; they only differed in whether it was worth it. Those for Brexit agreed that there would be up to a decade of economic damage.

cm2187• 4 years ago

Not just self-inflicted, self-inflicted by the BoE, in the process of fighting the inflation the BoE itself created by printing money irresponsibly, in response to moronic lockdown policies.

mahkeiro• 4 years ago

Yeah when they were talking about all the red tape that will be gone and then introducing the ukca marking to replace the ce marking… (facepalm)

The annoying British exceptionalism is for once coming to bite hard.

rwmj• 4 years ago

No one who does a days work in Britain thinks any of this is a good thing. It's largely generated by a far right party through a voting system that allows pensioners (a minority) to control who gets into power.

the_mitsuhiko• 4 years ago

Even better: there are two UKCA marks. UKCA for the Uk and UKNI for Northern Ireland.

hanoz• 4 years ago

mostly self inflicted

...by the Bank of England stoking a multi decade house price bubble.

brookst2• 4 years ago

And since recessions are partly a product of mass psychology, announcing that this will be the worstest recession ever makes it more likely to be the worstest recession ever. Even now they can't stop punching themselves in the face.

JohnJamesRambo• 4 years ago

Did they punch themselves in the face or was it Cambridge Analytica type meddling from groups with a vested interest in Brexit happening stomping them in the face with a boot?

From my brief reading about the matter it seems that the same villains showed up over there for that manipulation campaign.

_puk2• 4 years ago

"While it will not be the UK's deepest downturn, it will be the longest since records began in the 1920s, the Bank said."

They didn't say it would be the worst, just the longest.

They've also indicated that they aren't going to just keep madly raising interest rates, but expect to top out by next autumn:

"The Bank has done something it doesn't normally do in the published minutes of its decisions - it has given guidance that seems to suggest a peak in interest rates of about 4.5% next autumn.".

So it's far from scare mongering (on the bank's part, can't control how the media portray it), and more "this is not going to be a quick fix, we have some idea of how bad it'll get, and it's not as bad as the 80s. Please don't panic".

Quite a measured response in reaction to some bad news IMO.

tick_tock_tick• 4 years ago

mostly self inflicted

So self inflicted that all the world is heading in the same direction? The EU and USA are suffering from pretty much the same issues.

cliftonk• 4 years ago

the ironic thing is that the US did tons of direct check-type helicopter money and yet our growth is healthier and more robust than anyone else in the world (and the dollar has also outperformed).

given other countries did not undergo similar fiscal programs and have faced similar levels of inflation, i would argue that the larger component of inflation was the sudden global start-stop supply-chain shock from the pandemic rather than purely excess demand from the too-large fiscal programs. and i do not consider that shock to be self-inflicted (tho the excessive fiscal spending certainly was).

czbond• 4 years ago

You're confusing having THE reserve currency (for now) with having a healthy & robust economic economy or program.

U.S. debt situation is just the least ugly of all the ugly. You have to pick something, so for now, the $USD is it.

systemvoltage2• 4 years ago

Yea I was commenting here on HN in late 2020 about possible inflation because of all this money printing. Was repeatedly flagged for speaking up.

You guys don't remember, 2020 was an utter shitshow in terms of ability to disagree with the mob. We are better now but it was quite telling.

vkou• 4 years ago

Was repeatedly flagged for speaking up

You weren't downvoted for saying that money printing -> inflation[1], everyone with a basic grasp of arithmetic can understand this.

You were probably downvoted for thinking that letting the economy completely implode was preferable to inflation. Or, alternatively, that piling a few million bodies onto the altar of economic growth[2] in a pre-vaccine world was a good idea.

[1] Also, there's a difference between Wall St. inflation and Main St. inflation, and the latter is as much caused by the war and supply chain disruptions as it is by the printing press.

[2] Growth which wouldn't have even materialized, because everyone with an ounce of self-preservation dramatically changed their spending and travel habits.

mytailorisrich• 4 years ago

The main self-inflicted cause here is the energy crisis, which is by and large a result of bad policy recently and over the past decades. The second self-inflicted cause is public spending during Covid, bearing in mind that the UK has always been more exposed because it is not 'shielded' behind the euro.

If you are thinking of Brexit, I don't think it is a major cause although it obviously does not help.

w14• 4 years ago

Indeed - it was set up long before Ukraine or Liz Truss. But aside from bad long term energy policy, the incompetence of Andrew Bailey can't be ignored in my view.

In July 2021, Andrew Bailey said "Our forecast at the moment is that we do expect inflation to pick up in the next month or so really ... At the moment we don’t see that evidence [of long term inflation] but we will watch it, of course we must do, very carefully."

So he took no action.

By October 2021 his colleague Hugh Pill said "The magnitude and duration of the UK's inflation spike is proving greater than expected …"

And yet they continued to do nothing. They continued to claim inflation would rise to a few percent and then drop back.

It may be reasonable to say that they couldn't foresee Ukraine, but the inflationary pressure was already there, as you say partly because of Covid bailout money printing, but also from the supply side because of China's zero Covid policy, which was already recognised by many, but not by the Bank of England apparently, as being a fairly major contributor of inflationary pressure [1].

[1] https://www.asiapacific.ca/publication/china-has-hit-inflect...

ericd• 4 years ago

Yes, it’s self inflicted, but not due to recent events any more than a recession is the fault of whoever the sitting president is. There are deep, long-standing structural reasons for the stuff we find ourselves in, and the cycle is as old as civilization, because it’s just human nature. The politicians who advocate for austerity and fiscal discipline don’t tend to do as well as those who let the credit run like water.

kichimi• 4 years ago

The UK has been under austerity since 2008.

kayamon• 4 years ago

Why make the right choice when you can simply make the popular choice and then print more money to paper over the cost?

munk-a• 4 years ago

The other craziest thing is that the Bank of England isn't just saying "We'll have a recession" but they're specifically selling it as the longest recession ever.

If you ever want to have the longest recession ever a great first step is for your central bank to say "Hey - this one is going to be a lot worse than most of them". One of the responsibilities of central banks (which the Fed has taken quite seriously) is to carefully control messaging - if you're overly optimistic when things are clearly bad you'll cause a loss of faith and it'll make things worse... but there's also never a reason to go above and beyond expectations in how bad you think things will be because that causes people to batten down even more hatches and prolong the recession.

Markets are weird and they're essentially gigantic tabloids - the image of what's going on counts much more than tangible things like a shortage of widgets.

yakak• 4 years ago

The US is still entirely driven by its own consumers and the way its behavior reflects off the international economy, driving all that voodoo noise, but the UK?

I think they should kill zombie businesses quicker (yay, interest rates!) and try to pick up as many international worker positions from companies least likely to be zombies. Their downward slope locally is pretty inevitable but puts them in a good position like a weak currency for exports.

Giving up on a shoot the moon strategy that has gone this far usually means shooting yourself.

c7b• 4 years ago

One of the responsibilities of central banks is to carefully control messaging

That might be exactly what they're doing. The article says that their forward guidance for interest rate hikes is substantially below market expectations. Maybe they are hoping that a bit of gloomy talking will do some the work of slowing down price dynamics, reducing the need for them to take more drastic measures.

thedrbrian2• 4 years ago

we had to save the people from a 99.98% survivable virus..........

za3faran• 4 years ago

Add to that that it feels like some people want this to happen. It's a cycle. Media wants more clicks, they cover and exaggerate every small layoff, even though in other times no one would have said anything, people panic, managers and CEOs panic, more layoffs, snowball effect.

pessimizer4• 4 years ago

The Tories had better hand over government to Starmer quickly, because there's no possible way they can blame Labour for this one. Blaming Brown and Blair for everything has already gotten extremely long in the tooth; in a few years, there will be voters that will have never lived under a Labour government.

LatteLazy• 4 years ago

They'll do it. And plenty of people will eat it up. Because they don't mind losing, as long as others lose more.

duxup• 4 years ago

Are they brave enough to take the immediate loss for what might be a longer term strategy ... that may or may not pay off?

PUSH_AX• 4 years ago

This would be like the turkeys voting for Christmas. And we're talking about a party that consists mostly of extremely self serving members.

The drunk at the wheel is here to stay until the next natural GE.

pessimizer4• 4 years ago

It's Labour, and it's Starmer. The Tories will have government back in no time, with a clean slate.

raverbashing• 4 years ago

"Chaos with Ed Milliband" was their catchphrase, now they don't even have Bounty chocolate in Celebration boxes anymore. Disgraceful

gbrown_• 4 years ago

The banishing of the Bounty is one of the few purely good pieces of news we've had! I mean I'll cave a few days after Christmas and eat them but I'm not happy about it.

ravirajx72• 4 years ago

Btw what do you all think of global recession? Will it happen? If yes, who’ll suffer the most?

iammjm3• 4 years ago

The poor will suffer the most, as has always been the case since the beginning of times.

WanderPanda2• 4 years ago

Developing markets (starved for dollars to pay back loans) and and Europe (starved for energy) will suffer the most imo. The US will be infuriatingly fine (given the warmongering they are doing). It is most likely the FED will be able to pull of the soft landing (even if there is a small recession it will probably not be too deep and long)

testemailfordg2• 4 years ago

I am suddenly seeing articles about multiple US tech companies doing layoffs / pausing hiring on HN as well, not sure why and how all this relates....Has global recession started???

nluken• 4 years ago

While I won't object to the notion that a global recession may be on the way, the UK's particular situation is greatly exacerbated by Brexit and so might not be universal.

_puk2• 4 years ago

Don't forget the recent "mini budget" also had quite an impact on the current and future state of the UK economy!

irrational2• 4 years ago

Suddenly? I've been noticing the layoff announcements for more than a month. I work for a Fortune 100 company that has frozen hiring. That has only happened when layoffs are imminent.

shawabawa3• 4 years ago

Suddenly? I've been noticing the layoff announcements for more than a month

Layoffs have been happening since ~April

JshWright• 4 years ago

The global economic situation is certainly complicated, but at least in the US growth seems healthy at the moment. My take is that most companies are taking advantage of the impression that we're in hard economic times to perform layoffs that they wanted to do anyway. There are certainly cases where companies were too optimistic (expecting a bigger post-pandemic "bounce") and over hired.

As far as the UK goes though, this is just result of multiple terrible decisions and incompetence on the part of the government (Brexit, Truss's proposed tax cuts for the rich, etc). It is almost entirely self-inflicted, and the incredibly predictable outcome of the government's actions.

fny2• 4 years ago

My take is that most companies are taking advantage of the impression that we're in hard economic times to perform layoffs that they wanted to do anyway.

And convince people to take a wage cut or outsource/"insource" labor.

hcurtiss2• 4 years ago

As far as the UK goes though, this is just result of multiple terrible decisions and incompetence on the part of the government.

What is your evidence for this? It seems most countries in the euro zone are identically situated.

kmerroll• 4 years ago

All respect, but regarding the UK economic situation I think you meant (Freedom and national autonomy, and Truss's job builders empowerment). Yes, self inflicted but also incredibly awesome -- just depends on your view.

I'll see myself out.

onlyrealcuzzo• 4 years ago

The US economy != tech meme stocks.

Small cap tech stocks were literally worth 10-20x their present values. They hired like crazy (chasing more of that funny-money growth). Now they'll need to cut back some since the funny-money valuations are gone.

I wouldn't try to connect the dots and come to the conclusion that doom & gloom lies ahead.

TechBro8615• 4 years ago

It's elections season and there is about to be a shift in power. Those currently in power have been resisting labeling the current environment a recession. Expect this to change in Q1 2023 as they gaslight you into believing we're in a recession because of the new team in charge.

oxfordmale4• 4 years ago

The recession is driven both by an economic slowdown in China and the war in the Ukraine.

The economic slowdown in China is caused by the endless Covid lockdowns.

The war in the Ukraine is resulting in a shortage of natural gas in Europe, sharply driving up energy prices resulting in double digits inflation and people naturally tightening their spending.

The USA has mostly been protected as they have their own gas and oil supplies, however, they are not immune to what happens in the world.

ren_engineer• 4 years ago

who could have guessed that governments forcing economies to shut down for months would have long term ramifications? It's not like tons of people warned about the cure potentially being worse than the disease when you factored in the long term economic damage of lockdowns

incomingpain• 4 years ago

https://tradingeconomics.com/country-list/gdp-annual-growth-...

The definition of a recession is negative GDP; so who is it? You will notice those who are in recession are of a certain economic bloc, depending where you are in the world you will see them axis vs allies. Sure we should go further and look at real gdp but the point stands.

Now in terms of the USA tech companies:

https://tradingeconomics.com/united-states/gdp-growth

The USA briefly dipped into recession but pulled out.

The US tech companies doing layoffs isn't economic. It's war.

iammjm3• 4 years ago

But hey, THEY GOT BREXIT DONE! Poor dumb mfs... But to keep things in perspective, they fear 6,4% unemployment by 2025. Spain is currently at around 13%.

ravirajx72• 4 years ago

which country have the most employment btw?

iammjm3• 4 years ago

Globally I think its South Africa (~30%); in the EU it is Greece (~15%).

sz4kerto• 4 years ago

Spanish unemployment numbers are less reliable due to the larger grey/black economy.

ricardo81• 4 years ago

To be fair, the 'done' part was the actual leaving- notwithstanding the issues that continue like the NI border.

I voted to remain and would vote to rejoin. But I think in fairness the getting it "done" part was to leave the EU. NI border is pretty much unsolvable outside a common market anyway.

hatsubishi• 4 years ago

Spain has little real unemployment, those numbers are the people working without paying taxes or collecting unemployment. Look up employment rate instead, it’s on par with other OECD nations, I.e. Belgium, Italy, some US states, etc

olivermarks4• 4 years ago

The UK is essentially three entities: the city of London (a wormhole to a giant offshore tax exile trusts network) and a quasi sovereign state, the Crown corporation and the actual sovereign state. The money being siphoned off by the first two entities are largely immune to the oncoming UK nation state recession and are heavily invested in increased stateless globalization.

olivermarks4• 4 years ago

A great article by Labour peer Lord Glasman

https://www.ft.com/content/7c8f24fa-3aa5-11e4-bd08-00144feab...

olivermarks4• 4 years ago

Adam Curtis Uk 'oh dearism' 5 minute piece after the 2008 shakedown

https://youtu.be/wcy8uLjRHPM

WanderPanda2• 4 years ago

What are the exact mechanisms and quantities that the mentioned entities are „siphoning“ from the other one?

pmoriarty• 4 years ago

Dupe of: https://news.ycombinator.com/item?id=33450980

grammers• 4 years ago

The worst part of this, politically I mean, is that the Tories can blame inflation/general recession. But Brexit surely plays a huge part in this.

Guthur2• 4 years ago

The world economy died in 2008, it's just been on QE life support ever since.

This life support has spawned zombie companies everywhere that produce nothing that anyone really wants or needs and amount to nothing more than adult day care centres.

Chickens are coming home to roost on this one.

orblivion2• 4 years ago

I bought into that for a while (having followed that variety of economic opinion). The idea was that the whole system was hanging by a thread. A moderate shock would make it all fall over. Well, we got a hell of a shock in 2020, and we're doing economically kinda bad, as one would expect regardless after such a shock, but not catastrophically. I don't know what the right model is, but I no longer think that this is the one.

guerrilla• 4 years ago

Isn't that just because of more non-conventional intervention though?

Magnets• 4 years ago

Governments used QE to soften the shock from covid lockdowns and basically subsidise the economy. We are now seeing the consequences of that decision.

georgeecollins• 4 years ago

I don't know if you mean to be serious, but in case someone takes this seriously..

- China GDP is 3x 2007

- USA GDP 1.5x 2007

- New products since 2008: iPhone, Tesla Sedans, Uber, most video streaming services, all commercial VR, wearables. etc.

And probably someone was saying the world economy stopped in 2000, or other doom and gloom.

digianarchist2• 4 years ago

Exactly. The idea that this is the result of QE is wrong.

Guthur2• 4 years ago

If the US prints a tonne of USD and dumps it into the economy what do you think that does to the GDP figure?

China has built ghost cities everywhere over the last 10 years, it's all a mirage.

I mean this is all just the same old central banking nonsense, we've been here before, debt fuelled liquidity leading to massive speculation.

logicalmonster• 4 years ago

Maybe this explains why major publications have been calling for a "pandemic amnesty" lately about what was done and said about Covid.

ls15• 4 years ago

"I am sorry for destroying your life, so let's move on."

throwyawayyyy• 4 years ago

It's a crisis of productivity that Brexit has made worse.

Question for software engineers in the UK: how good are companies these days at training up junior engineers? One of the starkest differences I saw on leaving London for Silicon Valley was how much better SV is at training up young engineers. But I left a decade ago (in what was, in retrospect, a high watermark for the UK); perhaps matters have improved?

10g1k• 4 years ago

Recession and growth are most directly affected by central bank interest rates. When they say they "predict" such things, they mean they will make it so.

digianarchist2• 4 years ago

The illusion of a soft-landing by the Fed, and the Bank of Canada, has never been archived. All central banks are pushing their respective economies into recession.

pedalpete• 4 years ago

Does anybody else think that the media has been wrong so many times about growth and recessions that everything is always overblown.

2000 - technology forever 2001 - it's over, go home. 2006 - everything will go up forever! 2008 - RIP good times 2010 - we're going to be ok 2018 - boy were we wrong about 2008 - nothing can go wrong 2020 - oh crap, it's over 2021 - nope, we're fine, go all the things! 2022 - worst recession ever!

I even feel like I'm missing some things in there.

I'm not saying there isn't a downturn, there obviously is, but that's a downturn from the peak, and everyone being scared.

As Buffett says, be greedy when others are fearful, and I'd say everyone is more fearful now than they've ever been.

Looking at stock markets, the 2008 recession, S&P 500 showed the biggest drop from May 2008 - Jan 2009, with recovery from then. 2000 saw a slower descent from July 2000 to Sept 2002, but also slower growth on the back.

This time we've seen a a sharp decline, and I think there is a bit more of a decline, but how much of the decline is already priced in?

From 2000 to 2007 we really lost faith in growth and technology. Did much happen in the technology sector from 2000 to 2006? The iPod, media was going digital, but at the time that was mostly a loss of revenue to labels, not a lot of growth. Social was being figured out, etc etc.

Then came iPhone, mobile, social, SaaS (AWS began in 2006). These things converged for huge growth and really brought the internet and technology to the promise it initially aimed for.

This time, we're at the early stages of AI, clean-tech, bio & neurotech (my field).

My current belief is that yes, we've hit a wall, what do you do when you hit a wall? You don't stop. You go and beat the hell out of that wall. It will come down.

I see a bright future, but maybe I'm delusional.

mindentropy• 4 years ago

I have a theory here. In times of growth the large companies will hire like crazy so that people don't work or create competing products. When times are tough they fire people who in turn will work on creating competing or revolutionary products. This is why you see revolutionary products during recession.

Bank of England expects UK to fall into longest ever recession

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