Britain facing worst recession in 300 years as economy plunges

LOCKDOWN: GDP shrinks by 2% in first quarter of the year

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

“

The hope is that this economic hit can be shortlived but this is looking increasingly unlikely. STUART MCINTYRE

for more than three centuries. London’s FTSE 100 Index fell after the GDP data and amid concerns over a second wave of coronavirus cases in countries that have started to reopen post-lockdown.

The ONS figures showed all sectors were hammered in the first quarter, with a 1.9% drop in services output marking the largest quarterly fall on record.

Production output also fell by 2.1% in the first quarter, driven by declines in manufacturing, while construction output dropped 2.6%.

The first-quarter contraction comes after already weak growth at the end of 2019, when GDP was flat in the fourth quarter.

Trade data also showed the UK deficit widened to a far higher-than-expected £6.7 billion in March from £1.5bn in February.

Dr Stuart Mcintyre, head of research at the Fraser of Allander Institute based at Strathclyde University, said: “It’s important to remember that the UK economy went into lockdown in mid-march, so only the first couple of weeks of lockdown are reflected in these figures, with the economy shrinking by 5.8% in March itself.

“All of the wider economic indicators suggest that the decline in the economy between April and June is likely to be far larger, with the economy shrinking by something well into the double digits.

“The hope is that this economic hit can be short-lived, but this is looking increasingly unlikely.

“Mitigating the long-term costs of this will depend on two things: our ability to control the virus and the ability of our economy to adapt to this challenge.”