Wednesday 20th January 2021

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  • UK economy collapses 20.4% in Q2, unemployment fears mount

    Britain’s economy shrank by a record 20.4 percent between April and June, when the coronavirus lockdown was tightest, the largest contraction reported by any major economy so far, with a wave of job losses set to hit later in 2020, official figures showed on Wednesday.

    Official figures published on Wednesday also showed the world’s sixth-biggest economy entered a recession as it shrank for a second quarter in a row.

    There were signs of a recovery in June when output grew by 8.7 percent from May, the Office for National Statistics (ONS) said, just above economists’ average expectation in a Reuters poll for an 8-percent rise.

    However, some analysts said the shift likely reflected a catch-up in activity suppressed during the lockdown.

    The scale of the hit to the gross domestic product may revive questions about Prime Minister Boris Johnson’s handling of the COVID-19 pandemic.

    Britain has suffered Europe’s highest death toll, with more than 50,000 deaths linked to the disease between March 1 and June 30, according to the ONS.

    “The recession brought on by the coronavirus pandemic has led to the biggest fall in quarterly GDP on record,” said Jonathan Athow of the Office for National Statistics.

    “The economy began to bounce back in June… Despite this, GDP in June still remains a sixth below its level in February, before the virus struck.”

    Last week the Bank of England forecast it would take until the final quarter of 2021 for the economy to regain its previous size and warned unemployment was likely to rise sharply.

    The second-quarter slump in GDP was almost exactly in line with economists’ average forecast in a Reuters poll and exceeded the 12.1-percent drop in the eurozone and the 9.5 percent quarter-on-quarter fall in the United States.

    “Today’s figures confirm that hard times are here,” Finance Minister Rishi Sunak said. “Hundreds of thousands of people have already lost their jobs, and sadly in the coming months, many more will.”

    The level of output in June was 16.8 percent below its level a year earlier, compared with a 23.3-percent fall for May.

    Suren Thiru, an economist with the British Chambers of Commerce, said the pick-up toward the end of the quarter probably only reflected the release of pent-up demand rather than the start of a sustained revival.

    “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,” he said.

    (Cover: Police officers in Waterloo station during the morning rush hour, London, Britain, May 19, 2020. /Reuters)

    Source(s): Reuters

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