Yahoo Finance UK economy shrinks by one-fifth under coronavirus lockdown
The UK economy grew by just 1.8% in May as the country’s businesses began to reopen, signalling a slower-than-expected recovery from the depths of the coronavirus crisis.
While the month-on-month growth in gross domestic product (GDP) was markedly higher than the 20.4% collapse seen in April, it came in well below analyst forecasts of 5.5%, according to the Office for National Statistics (ONS).
Because April’s record decline followed a 5.8% contraction in March, the UK economy was still 24.5% smaller in May than it was before the onset of the crisis.
In the three months to May, UK economic output fell by 19.1% — almost one-fifth — with the ONS noting that government coronavirus restrictions had “dramatically reduced economic activity” during the period.
"Manufacturing and house building showed signs of recovery as some businesses saw staff return to work. Despite this, the economy was still a quarter smaller in May than in February, before the full effects of the pandemic struck,” said Jonathan Athow, a statistician at the ONS.
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“In the important services sector, we saw some pickup in retail, which saw record online sales. However, with lockdown restrictions remaining in place, many other services remained in the doldrums, with a number of areas seeing further declines,” he said.
Overall, the services sector — which makes up around 80% of the UK’s economic output — grew by just 0.9% in May, following a 19% decline in April. Industrial output climbed by 6%.
The manufacturing sector grew by 8.4%, while the construction sector rebounded by 8.2%.
Firms across several industries steadily began to reopen in May as the government eased coronavirus restrictions, so analysts had expected April’s contraction to represent the worst of the impact.
While further growth is expected in June, the slow pace of the recovery in May will dent optimism about a rapid V-shaped recovery.
Based on early experimental economic indicators, Bank of England chief economist Andy Haldane suggested last month that the UK was set for a “sooner and faster” recovery than any forecasters had predicted.
Haldane’s comments had cast doubt on the predictions of several mainstream forecasters, who have signalled that the UK’s economic downturn will be among the worst experienced by developed nations.
Last month, the Organisation for Economic Co-operation and Development said that the UK economy will contract by 11.5% this year, the sharpest decline due to be experienced by any of the 37 members of the organisation.
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And on Friday, ratings agency Moody’s said that the UK is likely to face the steepest downturn this year in the entire G20.
“Today’s data tells us that the UK economy started to recover as lockdown restrictions were eased in May. But what would normally be seen as strong growth in May of 1.8% mainly reflects the depth of the lockdown’s economic damage, rather than a swift or V-shaped recovery,” said James Smith, the research director of the Resolution Foundation.
All of the headline economic sectors contributed to the collapse in the three months to May. The services sector plummeted by 18.9%, while industrial production fell by 15.5%.
Manufacturing declined by 18%, while the construction sector saw a steep 29.8% slump.
