UK plunges into record recession

By Ged Henderson

12 Aug 2020

The coronavirus crisis has pushed the UK officially into recession as figures published today reveal the economy suffered its biggest slump on record between April and June.

The economy shrank 20.4 per cent over that period compared with the first three months of the year as the country went into lockdown.

It is the first time the UK has fallen into recession in 11 years, when the economy was hit by the global financial crisis. Chancellor Rishi Sunak said: “Today’s figures show that hard times are here.”

The Office for National Statistics (ONS) said its figures showed the economy had picked up in June. However, Jonathan Athow, deputy national statistician for economic statistics, said: “Despite this, gross domestic product (GDP) in June still remains a sixth below its level in February, before the virus struck.”

Productivity saw its largest-ever fall in the second quarter. Hospitality was worst hit, with productivity in that industry falling by three-quarters in recent months.

The Chancellor said hundreds of thousands of people had already lost their jobs and warned of more losses to come. He added: “But while there are difficult choices to be made ahead, we will get through this, and I can assure people that nobody will be left without hope or opportunity.”

British Chambers of Commerce head of economics Suren Thiru said the services sector had been particularly badly hit, with consumer-focused firms faring badly.

He said: “While there was a pick-up in activity through the quarter from the historically weak April outturn, this is more likely to reflect the release of pent-up demand as the economy gradually opened, rather than an indication of a sustained revival.

“With restrictions steadily easing, the second quarter is likely to prove to be the low point for the UK economy.

“However, the prospect of a swift ‘V-shaped’ recovery remains remote as the recent gains in output may fade over the coming months as the economic damage caused by the pandemic increasingly weighs on activity, particularly as the government support measures wind down.

“Against this backdrop, bold action is needed to immediately inject confidence back into the UK economy. This should include supporting businesses to retain staff through a cut in employer national insurance contributions and targeted support to help businesses placed under local lockdowns.”

Alpesh Paleja, the CBI’s lead economist, said: “Encouragingly, the economy grew in May and June, indicating that the early stages of a recovery are underway.

“Yet cashflow constraints are still biting hard for businesses, and with the pandemic not going away anytime soon, a sustained recovery is by no means assured.

“The dual threats of a second wave and slow progress over Brexit negotiations are also particularly concerning, underlining the need for maximum agility from government on both these issues, allowing a greater focus on the economy's long-term future.”

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