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The UK economy contracted at the fastest monthly rate on record in March when the coronavirus blockade triggered a collapse in activity and demand.
The UK’s gross domestic product fell 5.8 percent in March compared to the previous month, the biggest drop since the monthly series started in 1997, according to the first estimates by the Office for National Statistics.
In the first quarter, UK GDP fell 2% compared to the previous quarter, its biggest drop since the financial crisis.
“With the arrival of the pandemic, almost all aspects of the economy were affected in March, dragging growth to a record monthly decline,” said Jonathan Athow, deputy national statistician.
“Services and construction saw record declines for the month with education, car sales and restaurants falling substantially,” he added.
Production in the service sector, which represents 80 percent of the economy, fell 1.9 percent in the first quarter, the biggest decline since records began in 1990. The contraction was driven by a monthly decline in the 6.2 percent in March and A sharp drop in travel, accommodation and air transport, whose output almost halved in March.
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Production fell 2.1 percent in the first quarter, the fourth consecutive quarterly decline, despite pharmaceutical manufacturers reporting higher production. Construction contracted 2.6 percent, the steepest decline in all sectors of the economy.
The pandemic also ended more than four years of uninterrupted growth in UK household spending, with the sector reporting a 1.7 percent drop in the first quarter. Trade was also affected, with a 12 percent drop in exports and a 5 percent drop in imports in the first three months of the year.
“The blockade was only in effect for seven business days in the first three months of the year, but it was still enough to trigger the largest quarterly economic contraction since the peak of the financial crisis and the weakest change recorded in a single month.” said James Smith, director of research for the Resolution Foundation, a group of experts.
“With the country in full or partial closure in the second half of the year, the bleak economic milestones achieved in the latest data will be broken next time,” he warned.
However, the UK economy fared better than the eurozone economy, which contracted 3.8 percent in the first quarter, reflecting the subsequent start of the British blockade. In the United States, production fell 1.2 percent smaller.
The relative size of GDP contractions is linked to the severity of the locks, according to the ONS. “When compared internationally, it implies that the size of the contraction in the UK economy in the first quarter is in line with what might be expected given the policies that have been implemented in the UK,” the agency said.
The UK quarterly contraction is also milder than the 2.5 percent expected by economists polled by Reuters, and less severe than the latest Bank of England forecast. Last week, the central bank estimated that the economy had shrunk by about 3 percent in the first quarter and would contract an additional 25 percent in the second quarter. This would mean a drop of almost 30 percent in the first half of 2020, the fastest and deepest recession in 300 years.
However, the ONS cautioned that economic estimates for March and the first quarter “are subject to more uncertainty than usual as a result of the challenges we face in collecting the data under government-imposed public health restrictions.”
This week, the UK government issued a roadmap for the gradual restart of the economy, but economists doubt that there will be a strong rebound.
“Prospects for a ‘V-shape’ recovery have long since faded, and we do not expect the size of the UK economy to return to pre-virus levels until at least 2022,” said James Smith, economist at ING.
“It is clear that the outlook for many sectors has changed for the foreseeable future, given that social distancing measures are likely to be here until a vaccine or equivalent medical breakthrough occurs.”
