According to preliminary data released on Wednesday, the UK economy contracted 20.4% in the second quarter of 2020 compared to the previous three months, as restrictions due to the coronavirus pandemic significantly reduced business activity..
GDP (Gross Domestic Product) increased 8.7% in June thanks to relaxation of quarantine measures, posting a modest 1.8% recovery in May after a 20.4% contraction in April.
The fall in the second quarter is the worst on record and follows a 2.2% decline in the first quarter. According to a Reuters poll, analysts were expecting a 20.5% drop. Two consecutive periods of recession mean the UK economy is now in a technical recession.
Services, construction and manufacturing saw a record decline in the quarter, especially in the sectors most affected by quarantine restrictions, according to the Office for National Statistics (ONS).
«The economy began to grow in June with the resumption of store openings, factories that began to ramp up production, and construction of houses continued to recover, – said Jonathan Atow, Deputy National Statistics Division for Economic Statistics ONS. – Despite this, GDP in June is still one sixth below the level of February, before the virus hit the economy».
In terms of level, real GDP was last lower in the second quarter of 2003, while compared to the second quarter of 2019, the UK economy fell by 21.7%.
ONS noted that its estimates are subject to greater uncertainty than usual due to difficulties in collecting data due to public health constraints.
The magnitude of the blow to gross domestic product could raise questions about how the prime minister Boris Johnson copes with the COVID-19 pandemic.
The UK has the most fatalities in Europe, according to ONS, with more than 50,000 deaths from March 1 to June 30.
Last week, the Bank of England predicted that the economy would return to its previous size by the last quarter of 2021 and warned that unemployment could rise sharply..
«Today’s numbers confirm that these are tough times, the finance minister said. Rishi Sunak. – Hundreds of thousands of people have already lost their jobs and, unfortunately, will lose many more in the coming months.».
Employers have laid off more than 700,000 workers since March, according to the tax service..
Suren Tiru, economist at the British Chamber of Commerce, believes that growth towards the end of the quarter probably reflects only the realization of pent-up demand, and not the beginning of a sustained recovery.
«Perspective fast “V-shaped” recovery remains distant as recent gains in production may fade in the coming months as the damage done by the pandemic increasingly affects economic activity, especially as government support rolls back», – he said.