British economy slides into deepest recession on record due to Covid crisis
Britain's economy is officially in recession, after shrinking by a fifth in the second quarter, following two contractions in a row – the worst performance among G7 nations during the Covid-19 pandemic. However, analysts say there was a hopeful rebound in June due to the lifting of lockdown measures.
"It is clear that the UK is in the largest recession on record," the Office for National Statistics said after gross domestic product contracted by 20.4% in the period from April to June.
The British economy already shrank by 2.2% in the first three months of this year, the second contraction in a row.
It is Britain's first recession since 2009 and the performance is the worst of the so-called Group of Seven richest countries in the world over the same period.
By comparison, France's economy contracted by 13.9% in the second quarter, Canada by 12%, Germany 10.1%, the United States 9.5% and Japan 7.6%.
Looking at the first six months of 2020, Britain's performance "was slightly below the 22.7% seen in Spain, but was more than double the 10.6% fall in United States GDP over this period", the ONS said.
Analysts say there was a 20% drop in output in April, due to lockdown with widespread decline in output across the services, production, and construction industries.
British Finance minister Rishi Sunak said the data "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 on Wednesday.
Around 730,000 workers have been removed from the British payrolls since March.
The government plans to end the government's furlough scheme that is paying up to 80% of wages for nearly 10 million workers in October.
Rebound in June
Despite the morose outlook, the UK economy is beginning to rebound and London's stock market was up 1.3% in Wednesday afternoon trading.
ONS calculated that GDP grew by 8.7% in June, as the government eased strict lock down measures implemented in late March.
"The economy began to bounce back in June, with shops reopening, factories beginning to ramp up production and house-building continuing to recover," noted Jonathan Athow, deputy national statistician at the ONS.
"Despite this, GDP in June still remains a sixth below its level in February, before the virus struck."
To help the economy recover, the Bank of England has begun a cash stimulus and cut its main interest rate to a record-low 0.1%.
The BoE expects the unemployment rate to hit around 7.5% by the end of the year, up from 3.9%.
It forecasts that the British economy will have contracted by 9.5% for the whole of 2020.
(with AFP)