Britain’s economy shrank by one-fifth, more than any European neighbor, in the second quarter, as corporate coronavirus lockdown hit companies and plunged the country into deep plunge in the deepest recession, official data showed see Wednesday.
“It is clear that the UK is on record in the biggest recession,” the Office for National Statistics said after gross domestic product went up by 20.4 per cent in the period April to June.
A recession is defined as two consecutive quarterly contractions and the UK economy shrank by 2.2 per cent in the first three months of this year.
It is Britain’s first recession since 2009 and its performance is the worst of the so – called Group of Seven Richest Countries in the World in the same period.
By comparison, France’s economy shrank by 13.9 percent in the second quarter, Canada by 12 percent, Germany by 10.1 percent, the United States by 9.5 percent and Japan by 7.6 percent.
Looking at the first six months of 2020, Britain’s performance was “slightly less than the 22.7 per cent seen in Spain, but was more than double the 10.6 per cent fall in US GDP” States during this period, ”the ONS said.
The statisticians attributed Britain’s hard second quarter to a 20 per cent drop in output in April – “the biggest monthly fall on record, reflecting widespread … declines in output across the services, manufacturing, and construction sectors.”
– ‘Hard times’ –
Finance Minister Rishi Sunak said the data “confirm that hard times are here”.
He added: “Hundreds of thousands of people have already lost their jobs, and so will many more in the coming months.”
Sunak, whose official title is Chancellor of the Exchequer, plans to end the government’s furlough scheme in October, which pays up to 80 percent of wages for nearly 10 million workers.
The United Kingdom – which has the highest death toll from coronavirus in Europe – seems to be paying a heavier price for later confinement than its continental neighbors.
The British economy is also demanding more heavily on the services for severely affected services than other European countries.
– Rebound starts –
While officially in recession, the UK economy is starting to rebound as the government takes strict measures.
ONS calculated that GDP grew by 8.7 per cent in June as the economy gradually emerged from the lockdown carried out in late March.
That helped the pound to curb losses on Wednesday, while the London stock market was up 1.3 per cent in midday trading.
“The economy began to decline in June, with shops reopening, factories starting to increase production and house building continuing to recover,” notes Jonathan Athow, deputy national statistician at the ONS.
“Despite this, GDP in June remains a sixth below its level in February, before the virus struck.”
– Rising unemployment –
To help the economy recover, the Bank of England is pumping hundreds of billions of pounds into cash stimulation and has lowered its key interest rate to a record low 0.1 per cent.
“The substantial fiscal and monetary stimulus that has been introduced should provide ongoing support to the economy,” said EY economist Howard Archer.
“Although the economy is expected to achieve marked growth in the third quarter … the rate of expansion will slow in the fourth quarter as unemployment rises towards” the end of the furlough scheme.
Some 730,000 workers have been removed from UK wage statistics since March.
Announcements of job cuts have become a daily occurrence, with department store chain Debenhams axing 2,500 messages on Tuesday.
The BoE expects unemployment to rise by about 7.5 percent at the end of the year from 3.9 percent.
And it predicts that the UK economy will have contracted by 9.5 per cent for the whole of 2020.
However, the BoE estimates that growth will rebound by nine percent in 2021.
“A crisis in the labor market as well as another strong rise in (viral) infections could quickly put an end to this fragile recovery,” said Fiona Cincotta, City Index analyst.
bur-bcp / spm
