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The UK economy contracted marginally less than initially estimated in the second quarter of this year, but still posted its biggest decline on record and the worst contraction among the major economies.
Revised data from the Office for National Statistics shows that production in the UK fell 19.8 per cent in the second quarter compared to the previous three months. This is a slightly smaller contraction than the first estimate of 20.4 percent.
“The most comprehensive data has not substantially changed the economic landscape, with the UK economy still contracting by around a fifth in the first half of the year, much larger than any previous contraction on record,” said Jonathan Athow, national statistician deputy of the ONS and general director of economic statistics.
Despite the upward revision, the drop is the largest since the ONS began recording quarterly GDP in 1955 and shows that in the second quarter, the UK economy contracted more than twice as fast as the US. and Germany.
Production growth in the first quarter was revised down by 0.3 percentage points, a contraction of 2.5 percent, resulting in a 21.8 percent contraction of the economy in the first half of the year. year, the fastest pace of any G7 economy.
Production of services in the second quarter was revised up by 0.7 percentage points, but still decreased by 19.2 percent. Coupled with a downwardly revised contraction in the first quarter, services production fell by more than a fifth in the first half of the year.
The drop in industrial production was also marginally less severe than initial estimates, falling 18 percent over the six months of the year, slightly less than the other sectors.
However, construction growth was revised down by 0.7 percentage points, and the sector contracted 38% in the first half of the year.
With lockdown measures restricting movement and leaving many stores and restaurants closed, people’s ability to spend was limited in the last quarter. The household saving rate, the average percentage of disposable income saved, rose to a record 29.1%, compared to 9.6% in the previous three months.
Businesses also cut investment by 26.5 percent in the second quarter, the fastest drop on record, though better than the previous estimate of a 31.4 percent cut. By comparison, business investment fell by a maximum of 9.8 percent during the 2008 global economic recession.
ONS data for July showed that production rose 6.6 percent from the previous month. Figures for August are scheduled to be released next week, and analysts predict the economy is on track to post record expansion in the third quarter.
However, with the increase in the number of coronavirus infections and the implementation of more restrictions, economists warn that this growth could fail before production returns to pre-crisis levels.
“The renewed Covid-19 restrictions will likely mean that GDP will stagnate in the fourth quarter, leaving economic activity abandoned 5.5% below its pre-crisis level,” said Ruth Gregory, senior economist at Capital Economics in the United Kingdom.
“The risk now is that the new containment measures will reverse the recovery.”
