Record plunge: United Kingdom economy posts biggest-ever quarterly shrinkage

Marco Green
August 13, 2020

The ONS has reported that the country's recession is the deepest decline of any G7 nation in the second quarter and represents a fall double that of the United States economy, which shrank by 10.6% over the same period.

The Office of National Statistics (ONS) confirmed the second three-month period of decline in the nation's Gross Domestic Product (GDP) and the worst second-quarter contraction in western Europe.

"Our latest estimates show that the United Kingdom economy is now 22.1% smaller than it was at the end of 2019, highlighting the extent of this recession", the ONS said on Wednesday.

A woman wearing a face visor due to the Covid-19 pandemic, walks with shoppers past a shop in London.

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

Unlike other countries, Britain's statistics agency provides monthly figures to accompany the quarterly numbers and these show some hope that the economy is healing in the wake of the easing of some lockdown restrictions.

The eurozone's number two economy was in a longer and stricter lockdown than its eastern neighbour, and second quarter GDP fell more steeply, by 13.8 percent, after a drop of 5.9 percent in the previous three months.

"Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will", he said on Wednesday.

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.

Pay fell by the most in more than 10 years in the April-June period, down by 1.2 percent, reflecting how workers on the job retention scheme receive 80 percent of their salary.

Non-essential shops in England did not reopen until June 15, and pubs and restaurants were shut until July 4.

"The labour market continues recent trends, with a fall in employment and significantly reduced hours of work as many people are furloughed", said Jonathan Athow, ONS deputy national statistician for economic statistics. "Despite this, GDP in June still remains a sixth below its level in February, before the virus struck", he said.

ONS data released Monday showed that around 730,000 workers have been removed from the payrolls of British companies since March.

Announcements of job cuts have become a daily occurrence, with department store chain Debenhams axing 2,500 posts on Tuesday.

The BOE expects the unemployment rate to shoot higher to around 7.5 per cent by the end of the year from 3.9 per cent now.

However, even if the British government injects all its efforts and resources in the different spheres of the UK's economy, including investment, education, and training, positive changes won't happen overnight, the professor observes. Prime Minister Boris Johnson, who was hospitalized with the virus, has said he aims for a "return to normality" by Christmas.

Other reports by Click Lancashire

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