United Kingdom sees record recession over coronavirus pandemic

Daniel Fowler
August 13, 2020

The coronavirus pandemic has pushed most of the world's major economies into unprecedented contractions in the second quarter, except for China which escaped a recession.

U.K. GDP shrank by 2.2 per cent in the first quarter of the year, reflecting the lockdown that started on March 24. Today's ONS data shows that the United Kingdom economy is now 22.1% smaller than it was at the end of 2019, highlighting the effect the COVID-19 pandemic has had on economic activity.

- What does the June rebound in the economy mean?

According to Poshakwale, the UK GDP's nosedive was largely caused by the fact that the COVID-19 pandemic and subsequent lockdown severely hit the service sector comprising finance, retail, entertainment, trade, tourism, real estate, and hospitality, which contribute over 75% to the British economy.

But monthly figures showed the economy bounced back by 8.7% in June, following upwardly revised growth of 2.4% in May, as lockdown restrictions eased. The preliminary Q2 q/q reading fell by a record 20.4%, the largest fall since quarterly records began in 1955.

The UK has officially entered into recession after the coronavirus crisis saw the economy contract by a record 20.4% between April and June, the Office for National Statistics has said.

"Today's figures confirm that hard times are here", chancellor Rishi Sunak said on Wednesday. "Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will".

The nation's unemployment rate is expected to jump when the government ends its huge job subsidy program in October.

How many meals have been claimed on Eat Out to Help Out?
The policy gives diners 50% off their meal, up to a maximum of £10 per person, which is covered by the government. However, high street visits are still significantly down when compared to the same period in 2019.

Looking at the first six months of 2020, Britain's performance "was slightly below the 22.7 percent seen in Spain, but was more than double the 10.6 percent fall in United States GDP over this period", the ONS said.

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

"The falls in employment are greatest among the youngest and oldest workers, along with those in lower-skilled jobs".

That helped the pound to limit losses on Wednesday, while London's stock market was up 1.3 percent in afternoon trading.

He said: "The economy began to bounce back in June with shops reopening, factories beginning to ramp up production and house-building continuing to recover".

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

By the time Prime Minister Boris Johnson introduced the lockdown March 23, Britain was experiencing a bigger first wave of infections and deaths than might have otherwise been the case, Pickering said, meaning that restrictions had to last longer.

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