UK hit by record economic slump
ECONOMIC OUTPUT FALLS BY A QUARTER AS LOCKDOWN DERAILS SECTORS
The UK’s economy shrank by a quarter over March and April as entire sectors were shuttered by the lockdown. It contracted 20.4 per cent in April from March, when it shrank by nearly 6 per cent. The Office for National Statistics said the economy had shrunk back to its size in 2002. PM Boris Johnson said it was no surprise. “We depend on services, on human contact,” he said. “But we’re also a very resilient economy and we will bounce back.” The UK will now delay a post-Brexit plan to impose full border checks on EU goods so as to ease pressure on businesses
Britain’s economy shrank by a quarter over March and April as entire sectors were shuttered by the coronavirus lockdown, in what looks likely to be the bottom of a “catastrophic” crash before a long and slow recovery.
In a slump dwarfing previous downturns, the economy contracted by 20.4 per cent in April from March, when it shrank by nearly 6 per cent. It was 24.5 per cent smaller than in April 2019.
Both of April’s readings represented bigger declines than the unprecedentedly weak forecasts in a Reuters poll of economists. The Office for National Statistics said the economy had shrunk back to its size in 2002.
“This is catastrophic, literally on a scale never seen before in history,” Paul Johnson, director of the Institute for Fiscal Studies think tank, said. “The real issue is what happens next.” Prime Minister Boris Johnson said the figures were no surprise as Britain’s huge services sector was being hit particularly hard by social distancing measures, but he said a recovery would follow.
“Coronavirus is likely to hit a country like the UK economically very hard, we depend on services, on human contact,” he said. “But we’re also a very resilient and a dynamic economy and we will bounce back.” Much of Britain’s retail sector is due to open its doors next week and the government last month urged people who could not do their jobs at home to return to work as lockdown restrictions are gradually lifted.
The Organisation for Economic Co-operation and Development says Britain could suffer the worst downturn among the countries it covers.
Long-term damage
Bank of England Governor Andrew Bailey — who has warned of the deepest recession in three centuries this year — said on Wednesday he could see some signs of a recovery but long-term economic damage remained likely.
But the Organisation for Economic Co-operation and Development says Britain could suffer the worst downturn among the countries it covers, with an 11.5 per cent slump this year.
The BoE is expected to announce a fresh increase of at least £100 billion (Dh464.7 billion) in its bond-buying firepower next week.
IFS director Johnson told Sky News the hit might be short, if the roughly one third of private sector employees who are temporarily laid off can return to work, consumers go out and spend again and Britain avoids a second Covid-19 wave.
Unemployment may jump
But he said it was more likely that unemployment would jump when the government’s wage subsidy scheme ended in October, and that Britain would limp into 2021 with the risk of a Brexit shock also on the horizon.
The ONS said output in the dominant services sector fell by 19 per cent in April from March while manufacturing was down more than 24 per cent and construction crashed by 40 per cent.
In the three months to April, the overall economy contracted by 10.4 per cent from the previous three-month period, data showed.