The world is totally unprepared for a recession

But then there are the knock-on effects of the headline upsets. The energy crunch has hit the parts of Europe heavily reliant on Putin’s gas exports especially hard. But as Rishi Sunak, the Chancellor, told the House of Commons this week, the UK’s proximity and trade links still make us “acutely exposed to the European energy price shock”. And then there are the consequences being discovered in the Covid recovery process: the UK may boast extremely low unemployment, but on the flip side, the labour market is extremely tight after the pandemic. No doubt this is contributing to rising inflation. Over in the US, repeated trillion-dollar handouts have economists increasingly concerned the economy is now overheating. And when it does, they fear a recession will follow.

The technical definition of recession is perhaps not doing us much service. The Bank of England’s latest forecast for the UK economy, for example, doesn’t predict an outright recession: instead it shows multiple quarterly economic contractions over the next few years, but not (yet) two in a row.

But meeting the technical definition does not determine whether people feel fine financially or significantly poorer. If Britain’s economic outlook is anything like the Bank’s projections, we are facing years of extremely lacklustre growth. The pain of all that – the missed opportunities, the lack of prosperity – will be felt across the country whether the experience technically qualifies as a recession or not.

And in the worst-case scenario, the UK or global economy won’t stay teetering on the brink, but fall into a full-blown recession. As much as the Bank and the Government like to indicate that they have plenty of levers left to pull, in truth options are wearing thin.

Having taken interest rates back up to 1 per cent, the Bank could theoretically cut them again, but the effects would be superficial at best. The Government, meanwhile, is looking at record-high debt servicing payments and would find itself in a perilous position if it had to borrow more. This would inevitably lead to tough decisions around government spending and what has to go: not the kind of decisions any politician wants to make overnight.

This gets to the heart of future-proofing Britain’s economy for when tough times arrive, yet again. We can say that the Covid crisis created a once-in-a-generation economic crisis, which has justified constant use of the magic money tree (read: vast money printing and borrowing) to get through it, but in truth we’ve had three major economic upsets in the space of 13 years.

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There’s no guarantee that we will fall into recession once more, coming out of the pandemic, but there’s certainly no guarantee we won’t either. And having failed to fix the roof while the sun was shining, future economic dips may struggle to be met with the handouts we’ve become used to these past few years, with yet another £15 billion support package thrown into the mix this week.

One might argue the real problem is that the sun has never shone brightly enough since the financial crash for the roof to be fixed.

Telegraph, London