‘Economy contracts at fastest pace on record’

THE UK economy contracted at the fastest pace on record in March as the coronavirus crisis puts Britain on the brink of the worst recession in 300 years.

The Office for National Statistics (ONS) revealed activity plunged 5.8% in March in the biggest monthly fall since records began in 1997.

The March tumble sent gross domestic product (GDP) down 2% overall in the first quarter – the biggest fall since the end of 2008, when Britain was at the height of the financial crisis.

The latest figures show the first direct effect of the Covid-19 pandemic on the UK economy after the country was placed in lockdown to control the spread of the virus.

But with the lockdown only coming into place on March 23, the second quarter will show the full hit on the economy after the UK ground to a standstill.

Experts said the first-quarter data suggested the economy could contract by up to 20% between April and June as the full effects of the lockdown are captured.

The Bank of England last week warned coronavirus could see the economy plunge by as much as 25% in the second quarter and fall by 14% overall in 2020 – the worst annual fall for more than three centuries.

London’s FTSE 100 Index fell 1.3% after the GDP data and amid concerns over a second wave of coronavirus cases in countries that have started to reopen postlockdown.

Chancellor Rishi Sunak has said it is “very likely” that the UK will face a “significant recession” as a result of the crisis.

He told the BBC: “A recession is defined technically as two quarters of decline in GDP.

“We’ve seen one here with only a few days of impact from the virus, so it is now very likely that the UK economy will face a significant recession this year and we are in the middle of that as we speak.”

The Institute of Directors said the official data was a ”sobering first glimpse of the economic turmoil caused by the outbreak”.

George Brown, at Investec Economics, added: “While the figures look ugly today, they are just the tip of the iceberg.”

There are hopes the fall-out may be helped by the government’s move to begin lifting some of the lockdown restrictions yesterday and its decision on Tuesday to extend the crucial furlough scheme for workers until October.

But the economy is expected to bear some long-lasting scars.

James Smith, at ING, said the economy “could take two years to recover.”