UK economy crashes into deepest recession as GDP slumps 20.4% in second quarter

UK economy shrunk by record 20.4% in the second quarter (April to June), reflecting a significant shock since the start of the coronavirus pandemic. The Office for National Statistics (ONS) said that the release captures the direct effects of the coronavirus pandemic and the government measures taken to reduce transmission of the virus. 

ONS said that the economy is in a technical recession after witnessing a record fall of 20.4%, marking the second consecutive quarterly decline after it fell by 2.2% in Quarter 1. There was some pick up in June as government restrictions on the movement started to ease. There has been a record quarterly fall in services, production and construction output in Quarter 2.

The fall has been particularly prevalent in those industries that have been most exposed to government restrictions. The report stated that private consumption accounted for more than 70% of the fall in the expenditure measure of GDP in Quarter 2 2020, falling by 23.1%. There were also notable falls in gross capital formation and government consumption.

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Growth in June

While monthly gross domestic product (GDP) rose by 8.7% during June 2020, It remained 17.2% below February 2020 levels. The quarterly report shows that services experienced widespread growth in June, where the easing of lockdown measures had the most positive impact. Manufacturing and construction also witnessed widespread growth during June, primarily “because of increased demand and the recommencement of work, as businesses managed to operate while adhering to social distancing measures.”

On August 11, ONS said in its report that 730,000 people have lost their job in the UK since the beginning of COVID-19 lockdown in March. The latest set of data revealed that the second quarter of the year saw the largest quarterly unemployment since the 2009 financial crisis. Attributing the unemployment to the rise in economic inactivity in the country ONS explained that unemployed people were not looking for new work.

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