What's happening to the UK economy and how does it affect you?

When the economy shrinks and a country goes into recession, these things can go into reverse.

Governments tend to get less money in tax, which means they may decide to freeze or cut public spending, or put taxes up.

In 2020, the Covid pandemic caused the most severe UK recession for more than 300 years, which forced the government to borrow hundreds of billions of pounds to support the economy.

GDP can be measured in three ways:

Output: The total value of goods and services produced by all sectors of the economy - agriculture, manufacturing, energy, construction, the service sector and government.

Expenditure: The value of goods and services bought by households and by government, investment in machinery and buildings. This also includes the value of exports, minus imports.

Income: The value of the income generated, mostly in terms of profits and wages.

In the UK, the ONS publishes one single measure of GDP, which is calculated using all three measurements.

But early estimates mainly use the output measure, using data collected from thousands of companies.

The UK produces one of the quickest estimates of GDP of the major economies, about 40 days after the quarter in question.

At that stage, only about 60% of the data is available, so the figure is revised as more information comes in.

The ONS publishes more information about this on its website.

GDP is not the whole story as it does not include things like:

The hidden economy: Unpaid work such as caring for children or elderly relatives isn't captured.

Inequality: Rising GDP could result from the richest getting richer, rather than everyone becoming better off, and some people could be worse off.

Living standards: If the population is also growing, increased GDP can still mean less money per person, which can reduce people's living standards. This is why the GDP per capita measure is important.

Some critics also argue that GDP doesn't take into account whether the economic growth it measures is sustainable, or the environmental damage it might do.

Alternative measures have been developed which try to capture this.

Since 2010, the ONS has also measured well-being alongside economic growth. This assesses health, relationships, education and skills, as well as people's personal finances and the environment.

But despite its limitations, GDP is still the most widely used measure for most government decisions and international comparisons.