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UK in historic recession after steepest slump of major global economies

·3-min read

Britain has collapsed into its largest recession on record after the coronavirus lockdown sparked a 20.4% contraction between April and June in the biggest slump of any major global economy.

The UK’s nosedive into recession – as defined by two quarters in a row of falling output – marks the first since the 2008 financial crisis, with the eye-watering second-quarter plunge following a 2.2% fall in the previous three months.

The official figures confirm the UK was the hardest hit of all the major developed economies in the second quarter, even beating Spain’s 18.5% decline and double the contraction seen in the United States.

But monthly data showed a recovery from the nadir of the recession in April gathered pace, with the economy bouncing back by a better-than-expected 8.7% in June as lockdown restrictions eased.

This followed upwardly revised growth of 2.4% in May.

The Office for National Statistics (ONS) said the economy is still a long way off from recovering the record falls seen in March and April.

UK economic growth
(PA Graphics)

Chancellor Rishi Sunak said that the ONS figures “confirm that hard times are here”.

He said: “Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will.”

But he told broadcasters there were some “promising signs” for the economy after the June growth figures.

GDP graphic
(PA Graphics)

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 ONS said the UK economy is now 22.1% smaller than it was at the end of 2019 and 17.2% below levels seen in February, despite two months of growth since April when the UK was in full lockdown.

Jonathan Athow, deputy national statistician at the ONS, said: “The economy began to bounce back in June, with shops reopening, factories beginning to ramp up production and house-building continuing to recover.

“Despite this, GDP in June still remains a sixth below its level in February, before the virus struck.”

UK payroll employees.
(PA Graphics)

Experts said that hopes of a swift V-shaped recovery look dashed, while there are fears of an economic relapse amid the threat of a second wave of coronavirus and with a jobs crisis also on the horizon as government support measures come to an end.

The Bank of England also warned last week the UK could take longer to rebound than previously predicted, forecasting the economy would not jump back to pre-virus levels until the end of 2021.

The ONS’s initial second-quarter estimate shows the economy was hit across the board as the lockdown wrought havoc, with the services sector – which accounts for over three-quarters of UK output – dropping 19.9%, the construction sector falling 35% and manufacturing down 20.2%.

Samuel Tombs, at Pantheon Macroeconomics, said “the UK economy has underperformed its peers to an extraordinary degree”, though much of this is down to the economy’s reliance on the hard-hit services sector.

He cautioned the rebound will “peter out in the autumn” with further lockdowns likely.

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