UK officially in recession for first time in 11 years


The UK economy suffered its biggest slump on record between April and June as coronavirus lockdown measures pushed the country officially into recession.

The economy shrank 20.4% compared with the first three months of the year.

Household spending plunged as shops were ordered to close, while factory and construction output also fell.

This pushed the UK into its first technical recession – defined as two consecutive quarters of economic decline – since 2009.

  • The UK economy has officially entered recession after figures showed a second quarter of contraction
  • GDP was down a shocking 20.4 per cent in the three month to June at height of the coronavirus crisis
  • UK’s hit in the first six months of 2020 was the worst in the G7 with slump set to be the biggest in 100 years
  • The economy did recover to an extent in the month of June with the ONS finding 8.7 per cent growth

Rishi Sunak warned of a looming jobs catastrophe today as it was revealed the British economy plunged by more than a fifth at the height of the coronavirus outbreak.

Figures showed UK plc shrank by a shocking 20.4 per cent in the three months to June, the biggest fall in modern history, with record reductions in construction, services and production.

The news means the country is officially in recession – defined as two consecutive negative quarters – for the first time since the credit crunch.

The Office for National Statistics (ONS) said the economy bounced back in June as government restrictions on movement started to ease.

On a month-on-month basis, the economy grew by 8.7% in June, after growth of 1.8% in May.

But Jonathan Athow, deputy national statistician for economic statistics, said: “Despite this, gross domestic product (GDP) in June still remains a sixth below its level in February, before the virus struck.”

How does the UK compare with other nations?

The UK’s slump is one of the biggest among advanced economies, according to preliminary estimates.

The economy is more than a fifth smaller than it was at the end of last year. This fall is not as bad as the 22.7% decline in Spain, but about twice the size of contractions in Germany and the US.

The Bank of England has noted that social spending, such as eating out, going to a concert or watching a football match, is a bigger driver of growth in the UK than in the US or the eurozone.

The chancellor told the BBC that the UK economy had performed worse than its EU counterparts because it was focused on services, hospitality and consumer spending.

“Those kinds of activities comprise a much larger share of our economy than they do for most of our European cousins,” he said.

EU faces deeper recession than expected

Germany enters recession due to coronavirus in June, A slump in investments, consumption and exports pushed the German economy into recession in the first quarter, detailed data has confirmed. Economists predict the situation will get even worse in the next quarter.

Elsewhere EU faces deeper recession than expected.The coronavirus crisis will push Europe into a deeper recession than originally thought, the European Commission has said. But some economies are expected to fare better than others.

The eurozone economy will fall into a deeper recession this year than initially thought, and the recovery in 2021 will be less robust, according to an updated economic forecast released by the European Commission on Tuesday.

The revised forecast predicts the economy of the 19 nations that use the euro will shrink by 8.7% in 2020 before recovering with a growth rate of 6.1% next year.

For the 27 countries that comprise the EU, a downturn of 8.3% is expected in 2020, before growing by 5.8% in 2021.

It means that, in 2021, Europe will still be worse off than before the global outbreak of COVID-19 forced nations around the globe into lockdowns that drastically reduced commerce.

In May, the Commission had predicted an overall downturn of 7.7% in 2020 and a rebound of 6.3% next year.

“The economic impact of the lockdown is more severe than we initially expected,” said Commission Vice President Valdis Dombrovskis in a statement released with the updated forecasts.

The revised forecasts are based on a number of “critical assumptions,” including no second wave of infections that would trigger renewed lockdown measures.

As main risks, the report cites unemployment, corporate insolvencies, the absence of a deal between the UK and the EU, and the increasing intensity of the outbreak in the US.

“At the global level, the still rising rate of infections, particularly in the U.S. and emerging markets, has deteriorated the global outlook and is expected to act as a drag on the European economy,” the report said.

kp/rc (AFP, dpa, Reuters)

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