It was announced today (February 2) that the UK will be entering a mild recession this year. Though it is expected to be shorter than previously thought, there will be an impact on the entire nation. Just beginning their journey into adult life, what does a recession mean for students?
Though it won’t be as bad as previously predicted, any kind of recession isn’t good. This is particularly so when the UK is expected to be the only major economy to shrink this year, even compared to Russia. Whilst mortgage rates are expected to climb and job vacancies fall, students will be concerned about what a mild recession means for their future.
What Happens In A Recession?
To put it simply, 2023 won’t be as bad for the economy as first believed, meaning that the recession is ‘mild’ instead of fully blown. Though that is definitely a relief, we’re far from the struggle being over.
In general, a recession is when the currency decreases in value, no one is spending money because they don’t have it and unemployment rates tend to rise. All in all, it’s not what you want.
Interest rates will increase on mortgages and other loans. Sometimes, the prices for things go down as people aren’t buying them and companies are selling less, however, it can have the opposite effect if there is an increase in demand.
During a recession, it’s important to try and keep on top of your debts and keep your credit score up. Paying bills in full and on time is the best way to prepare.
The Impact On Students
The impact of recession can affect a university student’s life in many ways.
For instance, it’s highly like that there will be fewer graduate jobs on the market available. Even more so, the salary for the jobs that are available is expected to be less than before. This is because businesses won’t have the funds to create new positions and will be focused on reducing current spending internally. Even if someone vacated their position, the company could just try to compensate with their current employees instead of re-filling the job.
Everyone will be paying more for food, bills and other expenses. As maintenance loans are already insufficient at keeping up with rising inflation, you’ll find that your money will go even less. Those who don’t already have a job will likely find that it is necessary to stay on top of the cost of living. However, it’s even less likely that you’ll find even a part-time job during a recession.
Unfortunately, it’s also a time when students’ mental health will suffer more. Already, it’s a stressful time of your life and you may be feeling homesick as well. The additional stress of current finances and what it means for the future will only add to that. There’s already a pressure to find a graduate job straight after university and the decreasing number of opportunities only adds to that.
Recessions Hit Young People The Hardest
As reported by The Conversation, the impact of recession affects young people the most when looking at the last two the UK has experienced.
In 2008, the national rate of unemployment rose to 8 per cent, but it was almost double that for people over 25. This was largely due to one of the first things companies drew back on where graduate schemes. In 2020, the COVID pandemic sent the UK into another recession. One of the industries hit the hardest was hospitality, where a huge number of under-25s found themselves out of work.
That being said, one positive to come out of a recession is that house prices tend to fall. This is due to a decrease in demand; a huge purchase is riskier when more jobs are on the line. If you are financially secure, then it could be a good time to become a first-time buyer. However, you must ensure that you have job safety, your debts are paid and you can make the monthly payments. Though deposit amounts tend to drop during a recession, building up enough when money is tight is still tricky.
The impact of a recession is felt by everyone. However, young people often have less job security and are more vulnerable. As a university student, you may want to start searching for graduate schemes early before they disappear. Another option is to move back in with your parents after your graduate. Often this isn’t ideal, but the financial benefits can really help support your future. It’s an anxious time for everyone, but this mild recession won’t last as long as others.