Recession wipes out 17 years of growth

As UK suffers worst downturn in the G7, Sunak urges staff back to offices and warns: Hard times are here

ChanCellor rishi Sunak appealed to workers to return to their offices last night after figures showed Britain had plunged into the worst recession on record – with productivity plummeting.

GDP contracted by an unprecedented 20.4 per cent between april and June – laying bare the crippling impact of lockdown.

In that time, it shrank faster than any major developed economy, with Mr Sunak warning: ‘hard times are here.’

The record plunge followed a 2.2 per cent fall in the first quarter, meaning the economy has shrunk for two consecutive quarters and is officially in recession for the first time since the last financial crisis more than a decade ago.

The dramatic downturn has wiped out 17 years of growth, meaning the economy is now smaller than it was in 2003.

as millions have worked from home or been furloughed, the productivity of workers also plunged at the fastest rate ever – eclipsing the drop when edward heath’s Tory government introduced a three day week in 1974 to save electricity during the oil crisis and subsequent miners’ strikes.

The confirmation that Britain is mired in recession comes just 24 hours after the onS indicated 730,000 people have been laid off during the pandemic.

Speaking yesterday, the Chancellor said: ‘I’ve said before that hard times were ahead, and today’s figures confirm that hard times are here. hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will.’

Mr Sunak stressed the importance of office working to companies and the wider economy, amid fears the lack of people commuting into towns and city centres is fuelling a jobs bloodbath on the high street. he told ITV news that fewer people coming into the office is ‘not good for the economy’.

The Chancellor added: ‘It’s not great for people starting their careers to be sat at home doing everything on Zoom. I think you need to be in an office environment with your colleagues, your peers learning interacting adjusting to the culture. That’s what makes organisations strong and fulfilling places to work over time.’

a string of retailers which rely heavily on office staff commuting into work, such as Pret a Manger and Wh Smith, have already announced plans to shed thousands of staff.

a report published by US investment bank Morgan Stanley last week suggested British office workers have returned to their desks at a much slower pace than staff in France, Germany, Italy and Spain. according to the survey just over a third of UK white collar employers have returned to the office, compared to 83 per cent of French office staff.

Prime Minister Boris Johnson changed the Government’s guidance on working from home at the beginning of this month to urge employers to encourage staff to come back to the office if it is safe to do so. Mr Sunak said: ‘We will start to see the impact of that change in the coming weeks.’

although the economy bounced back almost 9 per cent in June as restrictions were lifted, Britain has still suffered the biggest hit during the second quarter of any major G7 economy. The exception is Japan, which is yet to publish its figure, but is not expected to be nearly as badly hit.

The contraction dwarfs that endured in countries including the US, Germany, France and Italy.

Samuel Tombs, from economic research consultancy Pantheon said Britain had underperformed compared with other countries to an ‘extraordinary degree’. he added: ‘The UK’s Government failure to lockdown early and then to stamp out Covid-19 quickly ranks as one of the biggest macroeconomic policy blunders in modern times. We’ve all paid a hefty price.’

Mr Sunak yesterday resisted fresh pleas to extend the Job retention Scheme for furloughed workers, despite fears of mass redundancies when it is shut down at the end of october.

The scheme has supported 9.6million jobs during the crisis at a cost of almost £35billion so far.