UK to Enter Recession in Q4 Amid Energy Crisis: Goldman Sachs Forecast

Goldman Sachs predicts the UK economy will slip into recession at the end of this year amid surging inflation. The bank said in a research note that it now expects The UK economy has already contracted in Q3 2025, and while it avoided a technical recession in Q4 2025, the outlook remains weak with December GDP indicating continued strain.

According to Goldman Sachs, the impending recession is largely driven by the ongoing energy crisis and its impact on household finances. This situation makes it challenging for the UK to avert a recession. Goldman expects households’ saving rate to fall well below its “equilibrium rate” to a record low 3.5 per cent in the second quarter of 2025. It forecasts real disposable income to be significantly impacted, further exacerbating the economic downturn.

In its base case scenario, Goldman expects the incoming recession to be relatively mild given fiscal support, excess savings and strong labour market momentum. However, the severity of the energy crisis and the effectiveness of government interventions will ultimately determine the depth and duration of the anticipated recession in Q4.