UK economy shrinks by record 20.4% in second quarter
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London — Britain’s economy shrank by a record 20.4% in the second quarter when the coronavirus lockdown was tightest, the most severe contraction reported by any major economy so far, with a wave of job losses set to hit later in 2020.
The scale of the economic hit may also revive questions about Prime Minister Boris Johnson’s handling of the pandemic, with Britain suffering the highest death toll in Europe. More than 50,000 UK deaths have been linked to the disease.
“Today’s figures confirm that hard times are here,” finance minister Rishi Sunak said. “Hundreds of thousands of people have already lost their jobs and, sadly, in the coming months many more will.”
The data confirmed that the world’s sixth-biggest economy has entered a recession, with the low point coming in April when output was more than 25% below its pre-pandemic level.
Growth restarted in May and quickened in June, when the economy expanded by a monthly 8.7% — a record single-month increase and slightly stronger than forecasts by economists in a Reuters poll. However, some analysts said the bounce-back is unlikely to be sustained.
Last week, the Bank of England (BOE) forecast it would take until the final quarter of 2021 for the economy to get to its previous size, and warned that unemployment is likely to rise sharply.
Any decision to pump more stimulus into the economy by the BOE and Sunak will hinge on the pace of growth in the coming months, and whether the worst-hit sectors, such as face-to-face retail and business travel, ever fully recover.
The second-quarter GDP slump exceeded the 12.1% drop in the eurozone and the 9.5% fall in the US. Some economists said the sharper decline partly reflected the timing of Britain’s lockdown — which fell more in the second quarter — and its dependence on domestic consumer spending.
Pent-up demand
Suren Thiru, an economist with the British Chambers of Commerce, said the recent pick-up probably only reflected the release of pent-up demand rather than a sustained revival. “The prospect of a swift V-shaped recovery remains remote,” he said.
Britain’s unemployment rate is expected to jump when the government ends its huge job subsidy programme in October.
Sunak — who told the BBC he saw some “promising signs” in GDP data for the month of June — reiterated his opposition to extending the programme. In July he cut sales tax for the ...
The scale of the economic hit may also revive questions about Prime Minister Boris Johnson’s handling of the pandemic, with Britain suffering the highest death toll in Europe. More than 50,000 UK deaths have been linked to the disease.
“Today’s figures confirm that hard times are here,” finance minister Rishi Sunak said. “Hundreds of thousands of people have already lost their jobs and, sadly, in the coming months many more will.”
The data confirmed that the world’s sixth-biggest economy has entered a recession, with the low point coming in April when output was more than 25% below its pre-pandemic level.
Growth restarted in May and quickened in June, when the economy expanded by a monthly 8.7% — a record single-month increase and slightly stronger than forecasts by economists in a Reuters poll. However, some analysts said the bounce-back is unlikely to be sustained.
Last week, the Bank of England (BOE) forecast it would take until the final quarter of 2021 for the economy to get to its previous size, and warned that unemployment is likely to rise sharply.
Any decision to pump more stimulus into the economy by the BOE and Sunak will hinge on the pace of growth in the coming months, and whether the worst-hit sectors, such as face-to-face retail and business travel, ever fully recover.
The second-quarter GDP slump exceeded the 12.1% drop in the eurozone and the 9.5% fall in the US. Some economists said the sharper decline partly reflected the timing of Britain’s lockdown — which fell more in the second quarter — and its dependence on domestic consumer spending.
Pent-up demand
Suren Thiru, an economist with the British Chambers of Commerce, said the recent pick-up probably only reflected the release of pent-up demand rather than a sustained revival. “The prospect of a swift V-shaped recovery remains remote,” he said.
Britain’s unemployment rate is expected to jump when the government ends its huge job subsidy programme in October.
Sunak — who told the BBC he saw some “promising signs” in GDP data for the month of June — reiterated his opposition to extending the programme. In July he cut sales tax for the ...
