Liam Halligan: Is Britain heading into another economic recession?

During lockdown, the UK endured the biggest slump in 300 years. So surely, it’s time for an economic bounce-back?

Well, that’s roughly what we’ve seen. Britain’s GDP – gross domestic product, the size of our economy – grew by a chunky 5.5 percent during the second quarter of this year, that is March to June.

And the International Monetary Fund, no less, predict the UK will grow 6.8 percent during 2021 as a whole, the fastest growth in the G7, beating every other major advanced economy. But official figures out this morning show, as On the Money has been warning for weeks now, that the British economy has stalled.

These are not bounce-back numbers. The economic contraction we saw in July was quite shocking - and in part reflects the “pingdemic”, which stopped around a million workers going to work.

Yet now firms now face lingering supply chain bottlenecks, spiralling input prices and incoming tax hikes. And remember, there’s no energy price cap for businesses - so manufacturers, steelmakers and other energy intensive firms are set to suffer.

Even for households, despite their price cap, energy bills have risen, after the price cap was raised this month, with another hefty price scheduled for next year. So this ongoing energy crisis is impacting both business and consumer confidence.

The British economy – unlike the US, Germany and certainly China – has yet to fully recover from this Covid pandemic. As our economy struggles to reboot, some economists are now ripping up earlier predictions, drastically redrawing their estimates.

There is growing concern, not least in light of these latest GDP numbers, the UK – far from bouncing back, could soon even enter recession – that is two consecutive quarters of falling growth. As we go into Christmas, demand for consumer goods, energy and food will rise but many firms will struggle to cope. That won’t only drive-up prices, but further damage both consumer and – crucially – business sentiment.

Amid supply chain issues and energy shortages, the Chief Economist of the Institute of Directors told On The Money lsat week that business confidence – without which investment stalls – "fell off a cliff" in September. The IMF brushes aside suggestions Britain could soon face stagflation – the combination of inflation and economic stagnation.

I’m also not saying a UK recession is likely. But credible people are now at least discussing that possibility – and so must we. So that’s your "On The Money" question today. Could the UK go into recession?