United Kingdom economy enters recession after 11 years

Andrew Cummings
August 14, 2020

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The U.K. economy suffered more than any significant European country throughout the coronavirus lockdowns, stacking pressure on the federal government to guarantee the withdrawal of its assistance programs does not hinder the nascent healing.

Rishi Sunak today warned of "hard times ahead" as the United Kingdom was officially declared to be recession after the coronavirus pandemic sent the economy plunging by 20.4 per cent between April and June.

The UK on Wednesday officially fell into recession for the first time in 11 years. According to the Times of London, Italy's economy shrank 12.4 percent, France 13.8 percent, Germany 10.1 percent and the US 9.5 percent.

Chancellor of the Exchequer Rishi Sunak warned that the economic slump would lead to further job losses in the coming months.

June, though, saw an 8.7% improvement and Berenberg points out that if GDP stays at this level throughout the current three months, it would already be up by 6.4% on a quarter by quarter basis.

The statisticians attributed Britain's dire second quarter to a 20-percent drop in output in April - "the biggest monthly fall on record reflecting widespread. declines in output across the services, production, and construction industries".

According to tax data, employers have already shed more than 700,000 jobs since March.

Sunak, whose official title is Chancellor of the Exchequer, plans to end in October the government's furlough scheme that is paying up to 80 percent of wages for almost 10 million workers.

UK GDP (gross domestic product) dropped 20.4% between April and June as government-imposed coronavirus lockdown measures kicked in fully.

The Office for National Statistics (ONS) said the economy bounced back in June as government restrictions on movement started to ease.

To help the economy recover, the Bank of England is pumping out hundreds of billions of pounds in cash stimulus and has slashed its main interest rate to a record-low 0.1 percent.

Unfortunately not. Despite growth over the past two months, the economy is still 22.1% smaller than it was at the end of 2019.

The BOE expects the unemployment rate to shoot higher to around 7.5 per cent by the end of the year from 3.9 per cent now.

And it forecasts that the British economy will have contracted by 9.5 percent for the whole of 2020.

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

"A labour market crisis or another strong rise in (virus) infections could quickly knock this fragile recovery off course", said City Index analyst Fiona Cincotta.

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