Britain is facing the highest risk of a damaging recession in 12 years, according to the UK’s Resolution Foundation.
According to the Foundations projection model, the chances of a recession in the UK had increased to 40% in recent weeks, up from 21% a year ago. The model draws data from bond yields and maturities and compared them to historical data of previous economic downturns.
The model predicts that if a similar to the 2007-8 crisis were to hit the UK, it could cost the British economy the equivalent of €2800 (£2,500) per household, per year.
However, the British government may have less scope to reach than it had a decade ago for two reasons: First, interest rates still extremely low at 0.75%, which provides little scope for monetary stimulus; secondly, government debt stands at 80% debt-to-GDP ratio, that is, double of what it was on the even of the previous crisis.