The UK enters recession after biggest fall in quarterly GDP on record

Marco Green
August 13, 2020

During the second quarter of 2020 in the three months to June, when the country was under lockdown as a result of the Coronavirus pandemic, gross domestic product (GDP), the broadest measure of economic prosperity, fell by 20.4%.

The UK has been tipped into the "largest recession on record", according to official figures charting the impact of the coronavirus crisis on the economy.

The grim figures come after ONS data on Tuesday showed around 730,000 jobs have been lost since the lockdown began in March, while employment also dropped by the largest quarterly amount for 11 years between May and June.

The entity assured, however, that the British economy began to show signs of recovery as of last June, when the authorities began to lift the quarantine.

The second-quarter slump in GDP was nearly exactly in line with economists' average forecast in a Reuters poll, and exceeded the 12.1% drop in the euro zone and the 9.5% quarter-on-quarter fall in the United States.

The ONS said that there were record quarterly falls in services, production, and construction output, with declines "particularly prevalent" in the industries that have been most exposed to government restrictions, such as accommodation and food services.

But monthly figures showed the economy bounced back by 8.7 percent in June, following upwardly revised growth of 2.4 percent in May, as lockdown restrictions eased.

The UK is officially in recession for the first time since the 2008 financial crisis.

Chancellor of the Exchequer Rishi Sunak told the BBC that the government is "grappling with something that is unprecedented" and that it is "a very hard and uncertain time".

The UK's economic output in June was 16.8 percent below its level a year earlier, compared with a 23.3 percent fall for May.

Under the Coronavirus Job Retention Scheme, the government has been paying a large chunk of the salaries of workers retained.

"But while there are hard choices to be made ahead, we will get through this, and I can assure people that nobody will be left without hope or opportunity".

The Bank of England also said it will take until the end of 2021 for the economy to grow back to its original size.

It is Britain's first recession since 2009 and the performance is the worst of the so-called Group of Seven richest countries in the world over the same period.

Britain imposed a strict lockdown two weeks later than Italy, 10 days after Spain and a week after France, despite swelling coronavirus cases.

The International Monetary Fund (IMF) predicts huge falls in GDP for 2020 as a whole - an extraordinary fall of 8.0% for the U.S. and 10.2% for the UK.

GDP shrank 2.2 per cent in the first three months of this year.

However, Samuel Tombs, senior United Kingdom economist at Pantheon Macroeconomics, thinks the United Kingdom economy will likely "lag" others because of "structural disadvantages", notably the fact that the economy is so dependent on consumer-facing businesses, where clearly human interactions are more important than in manufacturing or construction.

Other reports by Click Lancashire

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