COVID-19 pushing much of the world into record economic slumps

Andrew Cummings
August 13, 2020

Britain's economy contracted by a record 20.4 per cent in the second quarter with the country in lockdown over the coronavirus pandemic, official data showed Wednesday. It does not use the two-consecutive-quarters definition for recession and instead counts anything considered to be a "significant decline" in economic output.

While numerous lockdown restrictions have since been eased, the country faces a tough time in coming months, with unemployment likely to spike as the government phases out a support program that has effectively kept almost 10 million workers on company payrolls.

An easing of some lockdown restrictions in June, including the reopening of nonessential shops, delivered an immediate boost to the economy, with GDP increasing 8.7% on the previous month, according to the ONS.

Commenting on the figures, ONS Deputy National Statistician for Economic Statistics, Jonathan Athow, said: "The recession brought on by the coronavirus pandemic has led to the biggest fall in quarterly GDP on record". In June its output had recovered to just 6.3pc below its February level, from a peak-to-trough fall of more than one-third.

The hospitality industry was only allowed to reopen in July, so was particularly devastated between April and June.

Pay fell by the most in more than 10 years in the April-June period, down 1.2%, reflecting how workers on the job retention scheme receive 80% of their pay.

He said: "Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will".

"The larger contraction primarily reflects how lockdown measures have been in place for a larger part of this period in the United Kingdom", the ONS added.

The UK's recession is deeper than those recorded by comparable countries such as the United States and other European economies, notably Germany and France.

The quarter-on-quarter contraction in gross domestic product (GDP), which was only slightly better than the 21% that analysts had forecast, follows the 2.2% decline seen in the first three months of the year.

"I've said before that hard times were ahead, and today's figures confirm that hard times are here", said Treasury chief Rishi Sunak. Britain has the world's sixth largest economy.

Prime Minister Boris Johnson admitted the day before that the British economy will take months to recover from the crisis caused by Covid-19, which already leaves more than 46,600 deaths and nearly 313,000 positive cases due to the disease in the country.

It estimates that UK GDP will rebound in 2021 by 9 per cent.

But he told broadcasters there were some "promising signs" for the economy after the June growth figures.

The UK economy is much more dependent than the U.S. and other Europeans countries on social spending such as eating out and going to concerts.

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