The UK has been officially out of lockdown for more than six months, and the economy is starting to make a comeback. Post-pandemic spending habits along with the Christmas holiday have provided funds for the UK economy, which has now risen back to pre-pandemic levels.
However, could all of this be too good to be true? Victor Trokoudes, chief executive and co-founder of Plum, has shared his views on the country’s latest gross domestic product (GDP) data.
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What is Britain’s current GDP?
GDP is a figure that represents the value of all goods and services that have been produced in the UK. When the figure increases, this is an indication that the economy is healthy and that trade is going well.
The latest UK GDP data reveals positive outcomes for the UK economy. The country’s GDP rose by 0.9% in November 2021 and is now above its pre-pandemic level.
This is the first time that GDP has risen above this mark since the onset of coronavirus in the UK. Furthermore, the UK has seen a 1.4% increase in retail trade, which has sparked growth in the output of consumer-facing services. Nevertheless, consumer-facing services are still struggling to surpass pre-pandemic levels. However, all other services have managed to break through the pre-covid threshold.
During the depths of the pandemic, the UK economy saw a significant decrease. However, it seems that levels are returning back to what they were before coronavirus hit the UK.
Is this too good to be true?
While the latest GDP data may bring a sense of hope to many, some experts are less optimistic about the future of finance here in the UK. CEO of Plum, Victor Trokoudes, feels that the rise in the economy may not be as good as it seems.
The economy looks different now
Before the pandemic, a GDP increase could be used to predict a positive year for the UK economy. However, according to Trokoudes, the UK economy is not the same as it was two years ago.
This time, the GDP increase has come at the cost of inflation, which has seen the price of consumer goods rise significantly. As a result, the country is economically better off now than it was, but households are likely to face financial challenges in the coming year.
The financial squeeze could derail economic recovery
Trokoudes says that research by Plum reveals that UK households are already experiencing a 15% spike in the cost of everyday essentials. Furthermore, these whopping inflation rates, along with the recent holiday season, have created what is being called a ‘financial squeeze’ in the UK.
The squeeze refers to the growing struggle for UK households to make ends meet with their monthly income. Over the last few months, banks have experienced growing demand for credit card loans, and savings are beginning to dwindle.
If the squeeze continues, consumers may be forced to spend, which could cause the economic recovery to take a turn for the worse!
How to make your money stretch amid the financial squeeze
Households around the UK should be taking steps to stretch their monthly budgets amidst rising inflation rates in the UK. Popular ways to do this include:
- Cancelling unneeded monthly subscriptions
- Swapping premium branded products for cheaper alternatives or stores’ own brands
- Reducing monthly energy usage by putting on extra layers rather than turning the heating on
- Using a budget tracker app
- Cutting down on meals out and creating a weekly meal plan