Hospitality 'worst hit' as United Kingdom plunges into recession

Marco Green
August 13, 2020

Britain and Northern Ireland combined have the highest official coronavirus death toll in Europe with 46,706 deaths, though the number of excess deaths is even higher. More than 50,000 United Kingdom deaths have been linked to the disease.

"I've said before that hard times were ahead, and today's figures confirm that hard times are here", said Chancellor of the Exchequer Rishi Sunak. "Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will".

Jonathan Athow, the deputy statistician for economic statistics at the ONS, said: "The recession brought on by the coronavirus pandemic has led to the biggest fall in quarterly GDP on record".

Monthly data showed gross domestic product (GDP) grew by a better-than-expected 8.7% in June, following expansion of 2.4% in May, as lockdown restrictions eased further.

However, some analysts said the bounce-back was unlikely to be sustained.

Last week, the Bank of England forecast it would take until the final quarter of 2021 for the economy to regain its previous size, and warned unemployment was likely to rise sharply.

In the June quarter, the USA economy too shrank by 32.9 per cent - a bigger loss than any decline on record, and projections are that the showing by America would be worse in the September quarter - ensuring that it enters a recession too.

In the second quarter, output fell by 13.8% in France, by 12.4% in Italy, and by just 9.5% in the US.

Suren Thiru, an economist with the British Chambers of Commerce, said the recent pick-up probably only reflected the release of pent-up demand rather than a sustained revival. However the prospect of a swift return to "business as usual" - a so called "V-shaped" recovery is likely to remain remote, as the economic damage from coronavirus continues to evolve.

Chancellor of the Exchequer Sunak plans to end in October the government's furlough scheme that is paying up to 80 per cent of wages for almost ten million workers.

The U.K.is set to complete its departure from the European Union at the end of the year. The programme is due to end in October.

The latest figures add to evidence Britain is paying a heavy price for being slower than most of its peers to enter a lockdown in March, with GDP slumping to its lowest level since 2003 last quarter.

It closed restaurants, shops and other public spaces after many other European countries, meaning more of the hit was felt in the second quarter.

Figures from the Office for National Statistics show that gross domestic product (GDP) - which simply put, means the total value of goods and services produced in a country - fell in the three months to June by 20.4 percent. The US economy is forecast to contract 6.1 per cent this year, reflecting the disruptions associated with pandemic-control measures.

Non-essential retailers in England, including clothes shops and bookshops, reopened their doors on June 15.

The BoE expects the unemployment rate to hit around 7.5 percent by the end of the year from 3.9 percent now.

The services sector - spanning retail and hospitality to banks and real estate - has been knocked particularly badly by the lockdown, with restrictions easing only slowly for many and some activities still not fully open.

Other reports by Click Lancashire

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