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Chancellor Rishi Sunak said the government was “wrestling with something not before” after figures showed the UK economy had its biggest blow on record.
The economy shrank by 20.4% between April and June compared to the first three months of the year.
The two consecutive quarters of decline caused by the Covid-19 lockdown officially pushed the UK into recession.
Mr. Sunak told the BBC it was “a very difficult and uncertain time”.
In response to fears that the economic turmoil could trigger mass unemployment, the chancellor said the government should not claim that “absolutely anyone can and will be able to return to the job they had”.
However, he added that there would be support for job creation in new areas.
It is the first time the UK has been in a recession since 2009.
During the shutdown, household spending struggled as stores were ordered to close, while factory and construction production also fell.
Shadow Chancellor Anneliese Dodds blamed Prime Minister Boris Johnson for the magnitude of the economic impact, saying “a downturn was unforgivable after closing – but Johnson’s job crisis was not.”
How are ordinary people affected?
Kate Treglown, 44, of Walthamstow in east London, is currently out of work as a result of the coronavirus crisis. She was fired from her advertising job at the end of July after being on furlough.
“I worked for an advertising agency for 16 and a half years promoting live events. The work was fully operational in May,” she told the BBC.
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Kate Treglown
Kate says she feels “stuck in limbo” – anxious to try something new, but not sure when her children – who she has schooled at home – will return to school.
“There is work. There are jobs available. But when I look at LinkedIn, every job has hundreds of applications, so competition is very stiff,” she says.
“I feel that women really bear the brunt of this pandemic with regard to childcare, whether they work or not. It has made me feel quite depressed at times.
“My redundancy only lasts so long and I’m afraid of what the future holds for us at the moment.”
Is there a sign that things are getting better?
The Bureau of National Statistics (ONS) said the economy recovered in June as government restrictions on movement began to diminish.
On a month-on-month basis, the economy grew by 8.7% in June, after growing by 1.8% in May.
But Jonathan Athow, deputy national statistician for economic statistics, said: “Despite this, gross domestic product (GDP) in June remains a sixth below its level in February, before the virus struck.”
Which parts of the economy are suffering the most?
The ONS said the collapse in output was driven by the closure of shops, hotels, restaurants, schools and car repair shops.
The service sector, which accounted for four-fifths of the economy, has the largest quarterly decline on record.
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Factory shutdowns also result in the slowest car production since 1954.
The economic downturn was concentrated in April, at the height of the lockdown.
What is the government doing about it?
Official job figures released on Tuesday showed that the number of people at work fell by 220,000 between April and June.
But in a BBC interview on Wednesday, Mr Sunak did not wait for the end of the government’s furlough scheme of job subsidies, which is being phased out and will end after October.
“I think most people would agree that this is not something that is indefinitely sustainable,” he told the BBC.
The opposition has been critical of the government’s treatment of the economy during the pandemic.
Ds. Dodds said: “We already have the worst excessive death toll in Europe – now we are also on course for the worst recession. That is a tragedy for the British people and it happened on Boris Johnson’s watch.”
Referring to the tapering of the furlough scheme, she said the government “had wage support for companies that had not even reopened”.
How do companies deal?
Laura Tenison, founder of clothing company JoJo Maman Bebe, told the BBC that the trading performance of its 90 stores showed enormous variations, with those in urban locations suffering from a shortage of office workers and tourists.
“Those like York, Windsor, central London, Reading, Norwich – those are absolutely awful, really really awful,” she said.
“I mean, some days we don’t take money, put it that way. But some of the village shops, the chemical shops, they actually do it better than we thought.
“I think we have six stores in the portfolio that actually earned last year.”
Ms. Tenison founded her business in 1993, during a recession. “This is my third recession in my relatively long life in retail,” she said.
“We still have to be enterprising,” she added. “We have to close some areas of business because of Covid. We had to close our American business, which is just a massive sadness for me.
“Obviously everyone needs to look at their overheads, but be creative. Look at those opportunities that are there. Recessions bring opportunities.”
What do other people say?
Business groups are urging the government to do more to support economic recovery.
Alpesh Paleja, an economist at the Confederation of British Industry, said many companies are struggling to pay their bills on time.
He said: “Sustained recovery is in no way guaranteed. The double threats of a second wave and slow progress on Brexit negotiations are also particularly important.”
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While more recent data suggests that the recovery is getting treaty, the Bank of England does not expect the economy to return to its pre-pandemic size by the end of next year.
The budget responsibility bureau, the government’s official spokesman, expects the recovery to take even longer.
How does the UK compare to other nations?
The UK’s invasion is one of the largest among advanced economies, according to preliminary estimates.
The economy is more than a fifth smaller than it was at the end of last year. This fall is not as bad as the 22.7% decline in Spain, but about twice the size of contractions in Germany and the US.
The chancellor told the BBC that the UK economy had done less than its EU counterparts because it was focused on services, hospitality and consumer spending.
“Such activities involve a much larger share of our economy than they do for most of our European cousins,” he said.
