Smarkets Data Shows More People Hedging Bets on a UK Recession This Year

Home » Smarkets Data Shows More People Hedging Bets on a UK Recession This Year

Posted on: March 22, 2022, 10:59h. 

Last updated on: March 22, 2022, 10:59h.

The UK could enter a recession this year. The economy is a little unstable right now and, according to the movement on Smarkets’ political markets, Britains are increasingly becoming more pessimistic.

UK grocery store
A man walks down a half-empty aisle in a grocery store in London. Spurred by logistics issues, Brexit and more, a recession may come this year. (Image: CNBC)

Change is never easy and when it’s a massive transformation like what Brexit delivered, things become exponentially more complicated. The UK is going through a transition right now that raises certain doubts about what might be coming next.

With those doubts, there is also an increase in the possibility that things may get worse before they get better. That’s the growing sentiment reflected on Smarkets. More people believe that a recession is coming to the country this year.

2022 UK Recession in the Cards

The UK government is borrowing more money than it has in years, according to the UK’s Office for National Statistics. Inflation has resulted in an increase in debt interest payments and other unexpected costs.

Now, the gap between spending and income, as of February, is £13.1 billion (US$17.36 billion). This is the second-highest figure since 1993. The Guardian adds that interest payments on government debt increased over 50%, to £8.2 billion (US$10.866 billion), as a result of out-of-control inflation.

This, in part, has contributed to a more pessimistic outlook of the UK’s economy this year. Smarkets indicates that the odds of a recession in the country now stand at 33.78%. This is almost a 13% increase from where it was a month ago.

In addition, inflation will likely continue to rise, as well. 78% of Smarkets bettors think it will hit 7.5% by July, representing a 26% increase from the end of last month. At that time, 45% didn’t think it would, but that figure has dropped to 30.3% as of today.

There is a little bit of good news, though. More people now believe fuel prices won’t skyrocket out of control. On Smarkets, on the question of whether it will reach £2 (US$2.65) by the end of the year, 82% say no. This is up from 56.5% a few days ago.

The lines will shift in the next couple of days. Rishi Sunak, Chancellor of the Exchequer and the chief executive of the UK’s treasury, will provide a government budget update to legislators tomorrow.

Sunak Could Become Next Tory Leader

Sunak is on track to potentially take over for Prime Minister Boris Johnson, still reeling from partygate, as the leader of the Conservative Party. Smarkets shows him as the frontrunner for the position, although his odds slipped to 23%. This past January, Sunak was getting 40%.

The challenger is way out in front of another potential candidate, Liz Truss. At one point, she was getting as much as 25% of the voting bandwidth. Now, she’s at 9.09%.

On the lighter side of things, Smarkets makes tuning into Sunak’s budget address entertaining. It has a market on certain phrases that he might use. “Energy bills” is getting 57%, while “Hard working families” is getting 33%.

One phrase has really low odds, which is a very good thing. “No money left” is at 6.25%.

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