NIESR cites 60% risk of UK recession during British elections

UK's leading thinktank, the National Institute of Economic and Social Research (NIESR), said late Tuesday, per The Guardian, that it would take until the third quarter (Q3) of 2024 for British output to return to its pre-pandemic peak.

“There was a 60% risk of the government going to the polls during a recession,” adds the NIESR per The Guardian.

The NIESR’s quarterly update also states that the poorest tenth of the population had been especially hard hit by Britain’s cost of living crisis and would need an income boost of £4,000 a year to have the same living standards they enjoyed in the year before Covid-19 arrived.

It’s worth noting, however, that the NIESR appears divided about witnessing a contraction in British economic activity during late 2023.

Furthermore, the British thinktank also expects the British inflation to remain well beyond the Bank of England's (BoE) 2.0% target for the next four years while also expecting the price pressure gauge to ease from 7.9% to 5.2% by the end of 2023.

Market reaction

GBP/USD fades bounce off the weekly low around 1.2745 as the news amplifies British recession concerns and gains support from the broad risk-off mood.

Also read: GBP/USD Price Analysis: Cable bears stay hopeful near 1.2750 as US Dollar cheers risk aversion