GDP shrinks 2% in opening quarter as UK faces recession

The UK GDP shrunk by 2% in the first quarter of 2020, signalling the first direct impacts of the Covid-19 pandemic on the economy, new data published by the Office for National Statistics (ONS) has revealed.

The ONS suggested its latest snapshot had captured the government measures taken to reduce the transmission of coronavirus, with the most significant being the introduction of restrictions in movement across the UK.

Chancellor, Rishi Sunak, told the BBC: “It is now very likely that the UK economy will face a significant recession this year, and we're already in the middle of that as we speak.”

The ONS data showed the quarterly fall was driven by a record drop in one month, with the figures also revealing the UK GDP had declined on a monthly basis by 5.8% during March.

During the global financial crisis, from the peak in February 2008 to the lowest point of March 2009, the ONS stated the GDP contracted 6.9% over a 13-month period by comparison.

The data indicated all the headline sectors had provided a negative contribution to GDP growth in the three months to March, with the services sector falling by 1.9%, production by 2.1% and construction by 2.6%. The ONS said the impacts of coronavirus were seen “right across the economy”, with nearly all sub-sectors falling in the three months to March.

ONS deputy national statistician for economic statistics, Jonathan Athow, said: “With the arrival of the pandemic nearly every aspect of the economy was hit in March, dragging growth to a record monthly fall. Services and construction saw record declines on the month with education, car sales and restaurants all falling substantially.”

Responding to the latest release from the ONS, Resolution Foundation research director, James Smith, warned: “The lockdown was only in place for seven working days in the first three months of the year. But it was still enough to bring about the biggest quarterly economic contraction since the peak of the financial crisis and the weakest single-month change on record.

“With the country in full or partial lockdown well into the second half of the year, the grim economic milestones hit in the latest data will be shattered next time around.

“Today’s figures serve as a reminder as to why a bold economic policy response has been needed. That approach will need to continue as Britain begins the long road out of this economic crisis.”

CBI chief economist, Rain Newton-Smith, added: “The UK economy was hit hard by the necessary shutdown at the end of March, and recent data suggests the full impact of that difficult decision is still yet to come.

“The range of financial support for businesses and workers provided by the Government has been a lifeline for many firms so far. These schemes are critical in keeping companies afloat and they will need to adapt as the economy restarts.

“Reopening our economy will be a gradual, complex process. The Government’s new guidance has helped, giving businesses some flexibility for their individual circumstances. Ultimately, keeping health at the heart of a recovery plan will be key to sustaining an economic revival.”

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