UK Officially In Recession For First Time In 11 Years

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UK Officially In Recession For First Time In 11 Years

UK Chancellor of the Exchequer, Rishi Sunak

According to the GDP first quarterly estimate for the UK from April to June 2020, the UK economy suffered its biggest slump on record 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 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.”

The ONS said the collapse in output was driven by the closure of shops, hotels, restaurants, schools and car repair shops.

The services sector, which powers four-fifths of the economy, suffered the biggest quarterly decline on record.

Factory shutdowns also resulted in the slowest car production since 1954. The economic decline was concentrated in April, at the height of lockdown.

Responding to the report, the Chancellor Rishi Sunak said:

“I’ve said before that hard times were ahead, and today’s figures confirm that hard times are here.

“Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will,” he said, adding: “I can assure people that nobody will be left without hope or opportunity.”

Commenting on UK GDP figures for Q2 2020 published by the ONS, Dr Liz Cameron, Chief Executive of the Scottish Chambers of Commerce, said: 

“With restrictions steadily easing, the second quarter is likely to prove to be the low point for the UK economy. However, the prospect of a swift ‘V-shaped’ recovery remains remote as the recent gains in output may fade over the coming months as the economic damage caused by the pandemic increasingly weighs on activity, particularly as the government support measures wind down.

“Against this backdrop, bold action is needed to immediately inject confidence back into the UK economy. This should include supporting businesses to retain staff through a cut in employer national insurance contributions and targeted support to help businesses placed under local lockdowns.”

The full ONS report can be found here.

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