Double-dip recession - what does it mean to you?

The UK has returned to recession after the economy shrank by 0.2% over the first three months of the year.

This follows a fall of 0.3% in the final three months of 2011. Two consecutive three-month periods of negative growth means we are officially back in recession after the last downturn in 2009 - and this is the first time the UK has experienced a 'double-dip' recession since 1975.

Here, we take a look at what entering another period of recession means, why it has happened and how it will affect us all.

Why are we back in recession?

The shrinking economy is due partly to a sharp fall in construction output, the Office for National Statistics said.

Output of the production industries fell by 0.4% over the past three months, while construction decreased by 3%, and output of the service sector increased by 0.1%.

However, some experts have urged caution when it comes to interpreting these figures. Patrick Foley, chief economist at Lloyds TSB said: "Today's figure is a preliminary estimate, based on only 44% of actual data on the quarter.

"This helps to explain why there tends to be significant revisions between preliminary and mature estimates.

"Secondly, a fall in GDP of 0.2% is inconsistent with survey evidence over the past three months, which paints the picture of an economy building some modest momentum. In particular, the apparently dramatic fall in construction in the first quarter could be questioned.

"No matter what the data will eventually show for the first three months of the year, the unavoidable fact remains the underlying trend in the economy is flat. Official data for the second quarter is also likely to show a fall in output, reflecting the effect of the extra bank holiday in June.

Growth is expected to pick up in the second half of the year, as inflation falls, boosting households' real spending power. However, this remains dependent on the Eurozone moving closer to a more complete solution and avoiding a deep recession."

What will be the impact of another recession?

Most people will feel no immediate change despite the move into recession, as they are already struggling to make ends meet.

Joanna Elson OBE, chief executive of the Money Advice Trust, explained: "While the technical recession might have only just returned, unfortunately the people's recession never really went away.

"Unemployment has been rising, earnings growth has lagged a long way behind inflation, and Government spending cuts mean that welfare benefits have been squeezed.

"Across the country, month by month over the last few years, it has become progressively more expensive to heat up your home, put food on your table and fill your car with petrol."

What it does mean, however, is that people should continue to ensure their finances are working as hard as possible for them, especially as interest rates are expected to remain low for at least another couple of years.

What can I do to protect myself?

Try to build an emergency savings pot, so that you have some cash on hand in the event you are unable to work, or you are suddenly confronted with unforeseen expenses.

You should keep this money readily available in an easy access account, so that you can get your hands on it quickly and without penalty.

Coventry Building Society's Online Saver account is worth considering, as it pays a market-leading 3.15% annual interest before tax.

This rate includes a 1.15% bonus for the first 12 months. Alternatively, Sainsbury's Bank's eSaver Special account pays 2.90% annual interest before tax, without any short-term bonus included.

How can I keep my costs down?

Make sure you review all aspects of your finances regularly. That means checking you are on the most competitive energy tariff possible, reviewing your mortgage regularly to ensure you aren't paying over the odds, and making the most of vouchers and discounts wherever you can to keep your outgoings to a minimum.

You should also try to reduce your debts if possible. If you can't pay off your credit cards right away, make sure you're paying as little interest as possible by switching cards.

Current best credit cards for balance transfers include Barclaycard's Platinum Credit Card with Extended Balance Transfer, which offers 0% on balance transfers for 22 months, subject to a 2.9% handling fee, and Halifax's Balance Transfer Credit Card, which again offers 0% on balance transfers for 22 months, but has a 3.5% fee.

After the introductory periods finish, these cards both have representative annual percentage rates (APRs) of 17.9%.

What about unemployment?

If you are concerned about being made redundant but have not yet been informed of job cuts by your employer, it could be worth taking out unemployment insurance designed to cover your mortgage/rent and other financial commitments in these circumstances.

This will probably come in the form of accident, sickness and unemployment (ASU) insurance.

Bear in mind that many policies require you to be out of work for a certain period before you can make a claim, so always check the small print carefully.

You will also need to consider what protection you already have in place. If you already have mortgage, loan or credit card payment protection insurance, for example, you may already have sufficient cover.