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Page last updated at 13:40 GMT, Tuesday, 8 July 2008 14:40 UK
How would a recession affect you?
By Rajini Vaidyanathan
Newsbeat politics reporter

With more of us feeling the pinch, there has been a warning that the UK is "at serious risk" of a recession.

Sale sign
Recession would mean less money to spend at the shops

It comes from the British Chambers of Commerce, which represents businesses.

It surveyed 5000 firms, and says that for the first time since 1990, the number of companies reporting a drop in orders is bigger than those who've seen an increase.

The BCC's economic adviser David Kern said the survey showed a "menacing deterioration" in UK prospects.

He added: "The outlook is grim and we believe that the correction period is likely to be longer and nastier than anticipated."

But the government says the economy is continuing to grow and that forecasts show it will continue this year and next.

But it does admit things will be tougher for businesses.

What is a recession and when will we know if we're in one?

It's important to stress that although there are bleak predictions, we're not in a recession. Nor will we definitely be in one. The technical definition is when the economy is shrinking for six months in a row.

It's when the country's GDP (gross domestic product) - that's the value of goods and services produced in an economy in a year - is in the red.

What would be the effects of a recession?

Money would be tighter, so people could start to lose their jobs and they would be spending less at the shops. House prices could also fall. We are seeing some of these effects already but on a much smaller scale. It would also mean that the government would have less money to spend, so could affect things like schools and hospitals, and could even mean taxes go up to raise more money.

If we're not in a recession, why do we hear so many doom and gloom stories about the economy?

While the economy is growing, it's doing so at a slower pace than in the past. The credit crunch that we keep hearing about is having an effect on how much money we can borrow - to get a mortgage for example. We're also having to tighten our belts because of rising food and fuel prices. All of this means the cost of living is going up.

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