The UK has officially entered a recession as the economy shrunk by a record 20.4% between April and June, when the Covid-19 lockdown measures were tightest. The figures published by the Office for National Statistics (ONS) on Wednesday (Aug.12) marked a second consecutive quarter of contraction.
British GDP decreased by 2.2% in the first quarter of the year. A recession is defined as two successive quarters of decline in gross domestic product (GDP) - the amount of goods and services a country produces- which has not been seen in the UK since the financial crash of 2008, when unemployment skyrocketed and productivity stalled.
It is the "largest recession on record", ONS said, and also the largest contraction reported by any major economy so far.
The lockdown that started on March 24, forced shops, hotels, restaurants, schools and repair shops to close which saw consumer spending fall sharply, while factory and construction output decreased dramatically.
The ONS said the economy bounced back in June as government lockdown measures eased. GDP expanded by 8.7% in June having shown a meek 1.8% recovery in May following April’s 20.4% contraction.
"The economy began to bounce back in June with shops reopening, factories beginning to ramp up production and house-building continuing to recover," Jonathan Athow of the Office for National Statistics (ONS) said. But "Despite this, gross domestic product (GDP) in June still remains a sixth below its level in February, before the virus struck," he added.
(UK GDP crashes in Q2 2020 Source: Office for National Statistics)
On the morning the recession was declared, Chancellor of the Exchequer Rishi Sunak said “hard times” had arrived and warned that the economic slump would lead to further job losses in the coming months.
The quarter saw 220,000 jobs lost and brought the largest quarterly full in employment since May to July 2009. The Institute of Directors has called for the government to introduce more measures to help firms such as cutting employers’ national insurance contributions to make it easier for businesses to offer jobs.
Last week the Bank of England policymakers forecast it would take until the final quarter of 2021 for the economy to return to pre-pandemic levels, and warned unemployment was likely to shoot to around 7.5 percent by the end of the year from 3.9 percent currently. The central bank, which has slashed its main interest rate to a record-low 0.1 percent, it forecasts that the UK economy will have contracted by 9.5 percent for the whole of 2020.
The eurozone is also in recession. The bloc reported a 12.1% fall in its second-quarter GDP, according to statistics released July 31. Anything we can say about when recession will end would be pure speculation at this point.