UK in record recession as 2Q output shrinks 20%

Britain officially entered recession in the 2Q after GDP contracted by 2.2% in the 1st 3 months of the year

LONDON • Britain’s economy contracted by a record 20.4% in the second quarter (2Q) with the country in lockdown over the coronavirus pandemic, official data showed yesterday.

“It is clear that the UK is in the largest recession on record,” the Office for National Statistics (ONS) said.

Britain officially entered recession in the 2Q after GDP contracted by 2.2% in the first three months of the year.

The technical definition of a recession is two quarterly contractions in a row.

The ONS said the contraction for the first six months of 2020 “was slightly below the 22.7% seen in Spain, but was more than double the 10.6% fall in US”.

It added that Britain’s dire 2Q was driven by a 20% drop in output in April, “the biggest monthly fall on record reflecting widespread…declines in output across the services, production and construction industries”.

The economy is beginning to rebound, however, as the government eases its lockdown restrictions.

GDP output growth was 8.7% in June, the ONS said.

“The economy began to bounce back in June, with shops re-opening, factories beginning to ramp up production and house- building continuing to recover,” noted Jonathan Athow, deputy national statistician at the statistics office.

“Despite this, GDP in June still remained a sixth below its level in February, before the virus struck. “Overall, productivity saw its largest-ever fall in the 2Q. Hospitality was worst hit, with productivity in that industry falling by three-quarters in recent months,” he added.

Britain’s recession is its first since the 2008 global financial crisis.

The grim economic news comes despite unprecedented government interventions, including spending tens of billions of pounds on job support schemes in a bid to avoid mass layoffs.

The Bank of England (BoE) is, meanwhile, pumping out hundreds of billions of pounds in cash stimulus and has slashed its main interest rate to a record-low 0.1%.

ONS data released on Monday showed that around 730,000 workers have been removed from the payrolls of British companies since March.

Announcements of job cuts have become a daily occurrence, with companies expected to pick up the pace of layoffs as the government’s key employment support scheme ends in October.

The BoE expects the unemployment rate to shoot higher to around 7.5% by the end of the year from 3.9% currently.

The central bank forecasts also that the UK economy will have contracted by 9.5% for the whole of 2020.

It estimates that UK GDP will rebound in 2021 by 9%. — AFP