UK officially in recession after 20.4% GDP drop
The UK economy suffered its biggest slump on record in Q2, between April and June, with gross domestic product (GDP) falling 20.4%. This follows a fall of 2.2% during Q1 (January to March) 2020.
April 2020 output saw record falls in the three main indicators: services, manufacturing, and construction. Despite growth in May and June 2020, all three remained significantly lower than in February 2020.
Monthly GDP rose by 8.7% during June 2020, where the easing of lockdown measures had the most positive impact, with nearly half of growth from the wholesale and retail trade; repair of motor vehicles and motorcycles sector.
But GDP in June was still 17.2% below February 2020 levels.
The ONS noted that the biggest impact to businesses from coronavirus was the restrictions put in place regarding opening and social distancing.
Karim Yousfi, chief global strategist at Audacity Capital, said: “Amid all the record-breaking speed of the UK’s economic decline, one number stands out – the collapse in consumer spending.
“Household consumption shrank by 23.1% in the second quarter of 2020, by far the largest drop ever recorded. With retail sales volumes falling by just shy of a tenth during the same period, the chances of Britons spending their way out of what is now officially a recession look slim.
“Worrying too is just how badly the UK economy is doing compared to its European neighbours. UK economic output collapsed at more than double the pace of Germany’s in Q2, and shrank even more than Spain’s embattled economy.”
Tom Stevenson, investment director at Fidelity International, said: “The scale of the contraction compared with comparable countries is a concern, although it does reflect the length of time during the quarter that the UK was in lockdown.
“Expectations from the Bank of England that the economic fallout from the pandemic would be short-lived, or V-shaped, are borne out by the sharp fall and rapid partial recovery but UK GDP has seen the biggest quarterly drop of any G7 economy. No-one knows exactly what the recovery from coronavirus will look like – particularly with the potential for a second wave of infections and further local lockdowns – but it is likely that it will be a slow crawl towards pre-Covid levels with further government stimulus needed to restore sustained growth.”