UK Economy Plunges Into Worst Recession As GDP Plunges 20.4%
The UK economy is officially deep into its worst recession in 11 years as Gross Domestic Product contracted by a record breaking 20.4% in the second quarter of 2020.
In June, the GDP showed signs of recovery as lockdown
measures were gradually lifted and the economy expanded by 8.7%, after a preceding 1.8 % May recovery and the biggest 20.4% which occurred in April.
Analysts had projected a 20.5% contraction in the second quarter, following a 2.2% contraction in the first three months of 2020. The two successive contractions have officially landed the UK into a technical recession since 2009.
A report by the Office for National Statists (ONS) said that all economic sectors were hit but especially the most exposed to the government lockdown policies.
“The economy began to bounce back in June with shops reopening, factories beginning to ramp up production and housebuilding continuing to recover.” Stated Jonathan Athow, ONS Deputy National Statistical for Economic Statics.
Athow added that despite the slight rebound the GDP is still a sixth below its level in February, before the coronavirus struck.
The real GDP was last lowest in Q2 2003 and if compared to the GDP in Q2 2019, the UK economy is down a whopping 21.7%.
Britain Is the Worst Hit Member of the G7
Among advanced economies, Britain has the highest quarterly contraction, followed by France at 13.8%, Italy at 12.4%, Germany at 10.1% Canada at 12%, the US at 9.5% and lastly Japan at 7.6%.
Speaking during an interview with the Sky News on Wednesday, U.K’s Finance Minister Rishi Sunak said that the British economy’s composition has led it to its current predicament.
For instance, social activities like shopping, and going to the cinema, constitute a much larger share of the British economy than in most other European countries.
“So in a situation where you have literally shut down all those industries for almost three months, a long period of time, it is unfortunately going to have an outsized impact on our economy. “Stated Rishi Sunak.
The hospitality sector of the British economy which accounts for about 5% of the UK GDP, is by far the worst hit by the pandemic, according to data by the Trade Association UKHospitality.
Positive Economic News: How Soon To Expect Economic Recovery
In the third quarter of 2020, the burden of lockdown measures on both individual economies as well as the global economy will reduce significantly. Analysts expect a sharp rebound in the UK, given that the 8.7$ rebound in June has established a strong base.
According to a forecast by The Bank of England, the rebound should be as high as 18% in the third quarter. However, Brexit derailment as well as the hard hit to the labor market will likely slow down recovery in the fourth quarter.
“We expect pent-up consumer demand to drive recovery in the third quarter, although this momentum will gradually fade as the outlook for the labor market deteriorates.” Said Dean Tuner, economist at UBS Global Wealth Management.
