The UK appears to be heading into recession after the latest official figures showed the economy shrank between July and September.

The economy shrank by 0.2 per cent during the three months as soaring prices hit households and businesses, the BBC reported.

A country is in recession when its economy shrinks for two three-month periods in a row. The UK is expected to be in one by the end of the year.

The Bank of England has forecast a "very challenging" two-year recession which would be the longest on record.

Martin McTague, chairman of the Federation of Small Businesses, called the latest economic figures "dreadful news" for firms already under pressure.

A recession has been widely expected in the UK due to the prices of goods such as food, fuel and energy soaring, which is down to factors including the war in Ukraine.

Higher prices for goods has led to many households facing hardship and cutting back on spending, which has started to hit the economy.

The Bank of England expects the UK recession to be the longest since records began in the 1920s, saying unemployment will almost double.

The UK economy remains smaller than it was before the Covid pandemic. The Office for National Statistics (ONS), which published the economic growth figures, said business investment had dropped in the three months to September and also remained below its pre-pandemic levels.

The BBC reported Chancellor Jeremy Hunt as saying he was "under no illusion that there is a tough road ahead" as he warned "extremely difficult decisions to restore confidence and economic stability" would be required.

Mr Hunt is set to unveil his tax and spending plans next week in the Autumn Statement, which comes as households are being squeezed by the worst cost-of-living crisis since the 1950s.