UK Officially Enters Recession For First Time In 11 Years

Daniel Fowler
August 15, 2020

Britain's economy contracted by a record 20.4% in the second quarter (2Q) with the country in lockdown over the coronavirus pandemic, official data showed yesterday.

Stockton said that Britain was expected to be hit hard in the second quarter in part because of the timing of its lockdown - and because its economy relies heavily on hard-hit sectors.

Today's GDP figures revealing the UK's output shrank by more than 20% in Q2 shows "the heavy price the United Kingdom has paid" for being slower than its European peers to enter a lockdown, according to several investment professionals, who have said that while the figures are "spectacular", they are unsurprising. "Hundreds of countless numbers of individuals have now missing their positions, and regrettably in the coming months lots of a lot more will".

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

If Britain's GDP drops by more than 20 percent, it will have posted the worst performance in the second quarter in Europe, ahead of Spain (-18.5 percent) and France (-13.8 percent).

The technical definition of a recession is two quarterly contractions in a row.

- What does the June rebound in the economy mean? "Today's figures show that hard times are here".

"The cracks evident in the latest batch of labour market data are likely to soon turn into a chasm, with the unemployment rate rising from 3.9% to around 7% by mid-2021", she continued. Under the program, the government has been paying a large chunk of the salaries of workers kept on payroll.

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Britain's economy has shrunk by one fifth in the second quarter, more than any of its European neighbours, as the country's coronavirus lockdown slammed businesses and plunged the country into its deepest recession on record. The U.K. Office for National Statistics (ONS) states that even though the economy has started recovering with the opening of shops and factories, the GDP in June is still a sixth below in its level in February, a period before the pandemic.

Mr Ramsey said: "Quarter four last year was the start of our recession, and while we could be back to growth at this point, job losses are still going to be with us and we'll still be seeing employment falling by the end of next year".

It estimates the entire world economy will shrink by 4.9% this year, making it the worst recession since the 1930s' Great Depression.

And that's despite non-essential shops in England not reopening until mid June, with pubs and restaurants remaining shut until July.

In its forecast released last week, the BoE was less pessimistic about the fall in GDP for the whole of 2020, forecasting a drop of 9.5 percent.

"Unfortunately, the end of the furlough scheme will present a cliff-edge, statistically and economically, for those now relying on government support to make up their wages", he said.

While the timeline for economic recovery remains unclear, economists are doubtful that the worst is over.

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