UK heading for recession, former chancellor Lord Hammond warns

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The UK is heading for a recession, Lord Hammond has warned, saying “all the data points that way”.

The former chancellor told Sky News the country faces a “very, very difficult period ahead in the short term”.

He said he thinks the UK economy will slow down quite sharply in the autumn.

Lord Hammond said it was the “next part of the cycle that began with the COVID pandemic” when an “enormous government response” was delivered.

“To think that we can somehow move on from that, leave the tab on the table and act as if nothing had happened is unrealistic, is naive,” he said.

“There’s now got to be a part of the cycle where we correct for the extraordinary action that was taken during the pandemic.

“And a lot of what we’re seeing at the moment in terms of inflation pressures in the domestic economy is a result of the people having saved quite a lot during the lockdown period and that saving getting released into the economy over the last six months.”

He said that although the war in Ukraine is one of the drivers of inflation, the issue began long before the conflict, fuelled by COVID stimulus packages provided by the UK, US and other countries.

He said Brexit has also had an impact on soaring prices because it led to changes in supply chains.

“As we come out of the COVID crisis, supply and demand are out of kilter,” he said.

He said there are many parts of the economy that are “still not back working back to normal yet” so there is “bound to be an effect there”.