UK Recession Risk in 2025: Why I Was Preparing My Property Portfolio
January 21, 2025
In January 2025, I wasn’t looking at one disappointing number and deciding that the whole economy was finished. I was looking at several warning signs together: weak retail sales, slowing growth, fewer job vacancies and pressure in the government bond market. As a property investor with substantial borrowing, that combination mattered to me.
My video published on 21 January 2025 set out why I thought the risk of a UK recession was rising. It was a judgement about the outlook at that time, not a declaration that a recession had already been confirmed. This article preserves that discussion and the practical response I was making within my own portfolio.
You can watch the original economic update on YouTube. The useful question for an investor isn’t simply whether the next headline says recession. It’s whether your finances can withstand weaker demand and expensive borrowing at the same time.
Why the December retail figures concerned me
Christmas is a crucial trading period for retailers. When households are cautious during that period, I pay attention, because spending decisions can tell us something about how comfortable people feel with their money.
There is a correction to make to the spoken figures. I referred to a 0.2% monthly decline in retail sales. The ONS release published on 17 January reported a 0.3% fall in seasonally adjusted sales volumes for December 2024. It also reported a 0.8% decline across the final quarter compared with the previous quarter.
Seasonal adjustment matters here. These figures already account for normal seasonal patterns, including Christmas. A monthly fall doesn’t mean shoppers bought less in December than in an ordinary month without that adjustment. It means the result was weaker after allowing for the usual seasonal effects.
The ONS December 2024 retail-sales release also shows why a single headline needs context: annual sales volumes rose in 2024. My concern was about the recent direction, rather than claiming every comparison was negative.
I also discussed sales excluding fuel in the video. The broader point was to look beneath the aggregate figure and ask whether households were pulling back on purchases. One disappointing release cannot prove why they did so, but it can be a reason to examine the wider picture.
Slower growth was a warning, not proof of recession
At the time of recording, I was looking at growth slowing through 2024 and a flat third quarter. My fear was that weak retail activity might be followed by an economy that contracted in the fourth quarter and then again in early 2025.
That distinction is important. A technical recession usually means two consecutive quarters of falling real GDP. A flat quarter isn’t a contracting quarter, and a forecast isn’t an observed result. I was expressing a concern about what might happen next.
For historical context, the ONS subsequently estimated that the economy grew by 0.1% in the fourth quarter of 2024 in its first quarterly release. That information came after my video. The particular sequence I feared wasn’t established by the figures available when I recorded it.
I still think the preparation was sensible. You don’t need to predict the exact GDP release correctly to recognise that a business with thin margins deserves closer attention. Equally, being worried about the economy doesn’t give you permission to present a recession as a certainty.
For a landlord, the practical consequences can matter before any technical definition is met. Households may become more careful, employers may postpone hiring and a property may take longer to sell. Those possibilities belong in the plan even when the national economy is still growing slightly.
Why I was watching hiring decisions
Job vacancies were another part of my concern. I was hearing from people who were reconsidering recruitment, and I connected that with the forthcoming increase in employers’ National Insurance costs.
The policy changes were due to take effect in April 2025. They included a higher employer contribution rate and a lower earnings threshold, alongside a larger Employment Allowance for eligible employers. The effect therefore varied between businesses; it wasn’t the same extra bill for every employer.
My view was that businesses could react before the implementation date. If you know employing another person will become more expensive, you might delay the hire, change the role or invest in technology instead. You don’t necessarily wait until the first larger bill arrives.
But vacancies had already been falling before that Budget. It would be too strong to attribute the entire decline to one tax change or one government. My criticism was that I thought the policy risked adding pressure to an already weakening situation.
I also acknowledged in the video that the labour market wasn’t simply collapsing. Vacancies remained meaningful and unemployment was relatively low. Keeping that qualification matters because a worsening trend and an immediate crisis are different things.
My political view and what the data can establish
I was openly critical of Labour’s economic approach. I believed higher taxes and higher spending were damaging confidence and making the UK less attractive for business owners and investors. That was my opinion, and it remains part of what I said in the video.
However, charts do not isolate a government’s contribution by themselves. Interest rates, inflation, international events and decisions taken earlier all affect an economy. Seeing a change after an election doesn’t prove that the election or every subsequent policy caused it.
The distinction doesn’t require me to soften my judgement. It means being clear about which part is an official measurement and which part is my interpretation of the likely consequences.
As an investor, I also have to separate disliking a policy from making a good investment decision. I can disagree with the direction of government and still find an individual property whose rent, purchase price and financing make sense. Political frustration isn’t a substitute for checking a deal.
Higher borrowing costs reach the property business
I discussed rising gilt yields because they were a sign of more expensive government borrowing and wider pressure in financial markets. My interpretation was that markets were questioning the fiscal direction, although UK yields also respond to global bond markets and inflation expectations.
A gilt yield isn’t your mortgage rate. Mortgage pricing involves other factors, including the lender’s funding costs, swap rates, competition and the particular product. Nevertheless, a difficult borrowing environment can feed through to the rates available when a landlord refinances.
That mattered personally. In this January 2025 recording, I described approximately £2 million of debt across my property portfolio. I said the monthly money I was making had fallen from around £10,000–£12,000 to roughly £2,000–£3,000, largely because of higher interest costs.
Those were rounded figures from my own situation at the time, not a current portfolio statement or a typical result for every landlord. They explain why I wasn’t treating the rate discussion as something abstract.
For more on the connection, I’ve written about gilt yields and mortgage rates. The important issue is what your actual loan costs today and what happens when its current terms end.
My London example showed how little could remain
In the video, I described a London property worth about £400,000 with borrowing of just over £300,000. I put the monthly interest payment at around £1,500 and the rent at about £1,600.
That leaves only £100 before the other expenses. It isn’t £100 of dependable profit. Maintenance, empty periods and the rest of the ownership costs still have to be covered, while tax depends on the ownership structure and circumstances.
A landlord can’t necessarily solve that by increasing the rent to whatever their mortgage now costs. Tenants have budgets, and the local market determines what the property can reasonably achieve. The owner’s borrowing decision doesn’t remove that affordability constraint.
Other parts of my portfolio behaved differently. I described northern properties where rental increases had done more to offset the extra interest in cash terms. Those were observations about my properties, rather than a claim that every northern rental was thriving or every London property was failing.
This is why I review properties individually. A portfolio total can conceal one asset absorbing the cash generated by several others. Understanding that difference gives you a better basis for deciding where to spend, improve, refinance or reconsider your plans.
How I was responding as a business owner
My response wasn’t to assume that lower interest rates would arrive in time to solve everything. I was cutting spending and scaling back plans where the borrowing costs no longer left enough room.
I also explained that one of my businesses had established an office in India. In the recording, I said we had moved eight roles there and saved around 80% of the wage cost. That was a specific account of a business decision, not evidence that every UK business could or should do the same.
My argument was about incentives. If the cost of employing people in one location rises, businesses with a genuine choice of location may respond. That can have consequences for domestic hiring which deserve consideration when policy is designed.
I also spoke about my own move to Dubai and feeling that it offered me better value and a better lifestyle. Those are personal preferences and circumstances. They don’t establish the right decision for another person, whose family, work and financial position may be completely different.
Prepare for pressure without pretending to know the future
The lesson I take from this discussion is to prepare the portfolio for conditions that are less favourable than you would like. Know your mortgage renewal dates, understand the costs of each property and keep enough financial flexibility to deal with repairs or interrupted rent.
If a deal only works after a hoped-for rate cut, the hope is carrying too much of the investment case. If it works at today’s borrowing cost and has sensible reserves, you have more room to respond when the outlook changes.
That was the practical point behind my recession concern. I couldn’t control the economy or government policy. I could control my spending, my borrowing decisions and how honestly I assessed the properties I already owned.
If you’d like to discuss your next step, book a free 30-minute call with me. You can also explore Starter Club or find out about Done For You. Start with your own numbers, then use the economic backdrop to test them.