Economy Tips into Recession Following Worst Slump on Record

Written by: Keith Tully

Recession 2020The UK economy has officially fallen into recession after suffering the sharpest downturn on record between April and June of this year.

A GDP contraction of 2.2 per cent was recorded for the first quarter of this year, with the coronavirus crisis having hit in the final few weeks of that period.

But the second quarter saw a much sharper downturn and the initial figures suggest that the UK economy shrank by as much as 20.4 per cent during those three months.

Suffering two consecutive quarters of contraction officially puts the UK into recession for the first time in over a decade.

The scale of the decline in overall output between April and June was greater than anything previously recorded in a single quarter by the Office for National Statistics (ONS) and a steeper downturn than the slumps suffered elsewhere among G7 nations.

Key drivers of the downturn of course have been the public health crisis around Covid-19 and the nationwide lockdown that became necessary because of it from late-March onwards.

Lockdown restrictions have been eased gradually in recent weeks but many businesses are still having to contend with a new normal and layoffs are becoming widespread across many parts of the economy.

On a more positive note, the ONS has said the economy was growing on a month-to-month basis recently, with June having seen an 8.7 per cent upturn in GDP.

Nonetheless, the underlying data shows that the UK economy was around a sixth smaller in June than it was in February before the coronavirus crisis hit.

Responding to the latest figures, the chancellor of the exchequer Rishi Sunak 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.

Alpesh Paleja, lead economist at the Confederation of British Industry, has described coronavirus as having given the UK an “economic pummelling”.

“Cashflow constraints are still biting hard for businesses, and with the pandemic not going away any time soon, a sustained recovery is by no means assured,” he said.

Keith Tully

Keith Tully

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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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