British economy plunges into recession after record second-quarter fall

Marco Green
August 14, 2020

The Office for National Statistics said: "UK gross domestic product (GDP) is estimated to have fallen by a record 20.4 percent in Quarter 2 (Apr to June) 2020, marking the second consecutive quarterly decline after GDP fell by 2.2 percent in the previous quarter".

"The recession brought on by the coronavirus pandemic has led to the biggest fall in quarterly GDP on record".

"The economy began to bounce back in June". In June its output had recovered to just 6.3pc below its February level, from a peak-to-trough fall of more than one-third.

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

Any decision to pump more stimulus into the economy by the BoE and finance minister Sunak will hinge on the pace of growth in the coming months, and whether the worst-hit sectors such as face-to-face retail and business travel ever fully recover.

According to this report, 730 thousand people were removed during that quarter from the payrolls of companies, although the figure did not affect the unemployment rate because most took advantage of the subsidy designed by the government to avoid massive layoffs during confinement.

"I've always been clear that we can't protect every job, but. we have a clear plan to protect, support and create jobs to ensure that nobody is left without hope", he said.

The recession is its deepest since the start of record-keeping and deeper than any other major economy.

The UK has entered a recession for the first time in 11 years.

While numerous lockdown restrictions have since been eased, the country faces a tough time in coming months, with unemployment likely to spike as the government phases out a support program that has effectively kept almost 10 million workers on company payrolls.

Stock prices in London were expected to open lower on the back of the GDP data and after equity markets in the United States ended in the red on Tuesday as stimulus measures appeared to be deadlocked.

The UK government has so far failed to replicate most of the trade deals between the European Union and third countries that will no longer benefit British exporters at the end of 2020.

The UK economy is heavily reliant on services and household spending, both of which posted record declines in the second quarter, as consumers who were holed up at home spent less money and saved more.

Economists fear further bad economic news even after the lockdown ended reopened as the government withdraws its support for jobs and businesses.

By the time Prime Minister Boris Johnson introduced the lockdown on March 23, the United Kingdom had "a bigger first wave" than could have otherwise been the case, meaning restrictions had to go on for longer.

"That's a tragedy for our country and it's happening on the PM's watch".

"Furthermore, the EY ITEM Club believes there it's unlikely the economy will regain its fourth quarter 2019 size until 2024".

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

Other reports by Click Lancashire

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