The government is grappling with something that is unprecedented, Chancellor Rishi Sunak said
As the coronavirus pandemic swept across the country, businesses have been scrambling to stay afloat as the UK’s economy dealt with one of its most challenging periods in decades. However, the lockdown measures have now officially pushed the UK into a recession, as the country suffers its biggest slump among the world’s major economies.
According to the latest figures, the UK’s economy shrank 20.4 percent between April and June compared with the first three months of the year. The sharp decline, caused by the coronavirus lockdown, has officially pushed the UK into a recession ‘ and Britain could now be headed towards an inevitable job crisis. This is the “largest recession on record”, the Office for National Statistics (ONS) said, and the first time a recession has been declared in the UK since the financial crash of 2008. Chancellor Rishi Sunak said there will be support in creating jobs in new areas but added that the government should not pretend that “absolutely everybody can and will be able to go back to the job they had”.
“Today’s figures confirm that hard times are here,” the Chancellor said in a statement. “Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will. But while there are difficult choices to be made ahead, we will get through this, and I can assure people that nobody will be left without hope or opportunity.”
The unprecedented economic shutdown in response to the coronavirus crisis has cost nearly 750,000 jobs, leaving millions fearing for their future employment. Industries most exposed to government lockdown measures to contain the coronavirus pandemic, including services, production, and construction, saw record-breaking drops. Shadow chancellor Anneliese Dodds blamed Prime Minister Boris Johnson for the scale of the economic impact, saying: “A downturn was inevitable after lockdown – but Johnson’s jobs crisis wasn’t.”
According to data from the Office for National Statistics, the UK economic output fell by 22.1 percent in the first six months of 2020, which is worse off than Germany, France, and Italy, and double the 10.6% fall recorded in the United States. The ONS said the economy is still a long way off from recovering from the record falls seen in March and April. “The larger contraction primarily reflects how lockdown measures have been in place for a larger part of this period in the UK,” the ONS said. Meanwhile, China managed to avoid a recession and has already begun to pick up growth despite a damaging start to the year.
Kallum Pickering, a senior economist at Berenberg, said the UK GDP figures are not forecasting well for the rest of the year. “Typically, recession data are subject to heavy revisions,” he said in a research note. “Nevertheless, taken at face value, the bigger-than-expected contraction suggests some downside risk to our call of a 9.5% contraction in full year 2020.” Continued uncertainty of Brexit paired with the country’s economy could spell worrying times ahead. “The dual threats of a second wave and slow progress over Brexit negotiations are also particularly concerning,” Alpesh Paleja, lead economist at the CBI, said in a statement.