UK economy plunges by record 20% under lockdown

LONDON: The UK economy shrank a record 20.4% in April as businesses and workers reeled under the lockdown designed to control the coronavirus pandemic.

The contraction, which followed a 5.8% drop in March, will prompt louder calls for the government to press ahead with plans to ease restrictions on industries struggling to survive the recession. On a three-month basis, economic output shrank 10.4%.

The grim figures likely mark the nadir of the damage inflicted by the virus as more parts of the economy slowly get back to business.

But they come at a delicate time for Prime Minister Boris Johnson, who faced mounting criticism this week by politicians and scientific advisers who publicly blamed his Conservative administration for making a series of grave mistakes since the beginning of outbreak.

In addition to registering the highest death toll in Europe, the UK has also paid an heavy economic price. The OECD says the country could see one of the developed world’s deepest recessions in 2020, with output slumping more than 11% – the most for more than 300 years.

Unemployment is widely expected to reach rates not seen since the mid-1990s, with more than 7,500 job cuts being announced on Thursday alone as the lockdown hammers businesses from chemical manufacturers to airports.

That’s despite massive government support that has left the taxpayer paying the wages of over 11 million people at a cost of £27bil (Us$34bil) so far.

The pound was largely unperturbed by the plunge in output, which was expected by investors. It was down 0.2% at US$1.2575 as of 7:27am London time yesterday.

In April, the damage was done by a 19% drop in the nation’s dominant services industry. Manufacturing fell 24.3%, while construction plunged 40.1%.

The Bank of England, which has produced a scenario suggesting gross domestic product may shrink 14% in 2020, has already slashed interest rates to just above zero and ramped up its bond purchase plan to help cushion the blow.

Policymakers are due to meet again next week, when economists expect them to expand their asset-buying even further.

Separate figures showed the trade deficit excluding volatile non-monetary gold and precious metals narrowed in April, with both exports and imports falling sharply as the pandemic disrupted shipment of cars, fuels, works of art and clothing. — Bloomberg