Recession Hits U.K with Record Plunge in Quarterly GDP

The economy of the United Kingdom has hit a record shrinkage of 20.4% in the second quarter between April and June. This major shrink came at a point when the coronavirus pandemic was strongest. The U.K economy was seen to be the one that was affected the most by the coronavirus pandemic in Europe, also recording the highest death toll.

The data gathered revealed that the U.K economy which is the sixth world’s largest economy have moved into a time of economic recession. This would be it's first, with its last recorded recession being far back in 2009. In this same period, Germany and the U.S lost about 10% of their output, Italy lost 12%, France lost 14%, Spain lost 19%, Canada 12%, and Japan 8%.

Sectors that are involved in services, construction, and production recorded a fall, as some of these sectors were greatly affected by the restrictions placed by the government, as reported by the Office of National Statistics.

The U.K finance minister, Rishi Sunak told Sky News in an interview why the U.K economy was affected in this manner is because of its composition, compared with the economy of other countries. He said “Social activities, for example going out for a meal, going to the cinema, shopping, those kinds of things comprise a much larger share of our economy than they do for most of our European comparative 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.”

Jonathan Athow, the Deputy National Statistician for Economic Statistics said “The economy began to bounce back in June with shops reopening, factories beginning to ramp up production and housebuilding continuing to recover… Despite this, GDP in June remains a sixth below its level in February, before the virus struck.”

The Office of National Statistics (ONS) also clearly made it known that there has been difficulty in getting data, as a result of the restrictions placed by the government. Noting that the estimate it gives would be subject to a lot of uncertainties.

With the information gathered from Economists, a rebound is expected in the third quarter as the burden of the lockdown is reduced, and the U.K can avoid a second wave.

The Bank of England has made a forecast of an 18% third-quarter jump, also forecasting that the U.K economy would take until the final quarter of the year, 2021 for the economy to get back to its previous size. It also warned that it is likely there will be an increase in the rate of unemployment.

Rishi Sunak also said that the figures confirm that they are faced with hard times and hundreds of people in the U.K have lost their jobs, and it is sad that many more will lose their jobs in the coming months.

James Smith who is an ING Developed Market Economist said rising unemployment is “probably the biggest threat to the recovery at the moment, and this is being linked to the gradual unwinding of the government’s furlough scheme over the next few months.”