New Office for National Statistics figures released this morning show UK GDP plummeting by 20.4% in the second quarter of 2020 – the largest confirmed fall of any economy in Europe and the G7 group of nations. It follows a -2.2% fall in the first quarter of the year, meaning the UK has now officially entered recession for the first time since the global financial crisis in 2008/09.
Countries across the world are falling into recession in the wake of the COVID-19 crisis. The impact of lockdown measures on businesses, consumer demand, and confidence in the economy has caused a noted fall in spending across the world. Many measures are still in place in the UK, as they are across much of Europe. However, no other European country has suffered such a steep fall as the UK.
The UK’s second quarter performance compares dismally to its European counterparts, with confirmed figures over the same period showing the French economy shrinking by -13.8%, Italy’s by -12.4% and Germany’s by -10.1%. The UK is also an outlier among other G7 nations, with the US suffering a -9.5% fall in GDP in Q2 2020 and Canada provisionally dropping by -12%.
This data is slightly skewed by the government's business support packages, which currently offer pay for furloughed workers and interest free loans or grants for businesses that have had to temporarily close due to restrictions. These measures have been more generous than many comparable countries, and are not fully taken into account in the figures - although the continued fall in economic activity is clearly increasing the long term cost of these schemes.
Today’s GDP figures come just a day after ONS labour market overview revealed the number of people in work between April and June this year fell by the largest amount in over a decade. One in three firms also say that they expect to make redundancies between now and September, and there are 730,000 fewer employees on the UK payroll in July than there were in March.
Anneliese Dodds, Shadow Chancellor of the Exchequer, said:
We’ve already got the worst excess death rate in Europe – now we’re on course for the worst recession too. That’s a tragedy for the British people and it’s happened on Boris Johnson’s watch.
The Prime Minister will say there’s only so much he could do during a global pandemic, but that doesn’t explain why our economy is tanking so badly compared to other countries.
It was his government that snatched away wage support for businesses that hadn’t even reopened yet. And his government that failed to get test, trace and isolate working despite claiming it’s a ‘world-beating’ system.
A downturn was inevitable after lockdown – but Johnson’s jobs crisis wasn’t. Now he must take responsibility, scrap the one-size-fits-all withdrawal of wage support and bring the health crisis properly under control.
Chancellor Rishi Sunak said that he's "said before that hard times were ahead, and today’s figures confirm that hard times are here". He continued:
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Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will.
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.