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UK Economy Suffered Sharpest Quarterly Contraction Since 1979

Written by: Keith Tully

UK economy strugglingThe three months to the end of March saw the UK economy suffer its sharpest quarterly decline in overall output since the late 1970s.

A revision of the figures for the first quarter of this year means that the economy officially shrank by 2.2 per cent between January and the end of March, according to latest data from the Office for National Statistics (ONS).

Initial estimates had said the economy contracted by 2 per cent in the quarter but the downturn is now believed to have been even sharper.

March saw a particularly steep 6.9 per cent decline in output as coronavirus began to spread throughout the country and business activity slowed up dramatically.

The ONS initially believed GDP shrank by 5.9 per cent in March but those figures have been revised and are now thought to have been an underestimation of the downturn.

Not for more than 40 years has a three-month period seen such a drop off in economic activity.

Expectations are that even sharper downturns in GDP will have been recorded in the months of April and May, with so much economic activity having been curtailed entirely due to COVID-19 from mid-March onwards.

Key sectors of the economy suffered a very sharp drop in spending in late March as consumers across the country suddenly stopped buying cars, using hotels, visiting pubs and restaurants, or treating themselves to new items of clothing or footwear.

The services sector, which accounts for close to 80 per cent of all activity within the UK economy, suffered a particularly strong dip in output in the first quarter, with a decline of 2.3 per cent being reported by the ONS.

“Our more detailed picture of the economy in the first quarter showed GDP shrank a little more than first estimated. This is now the largest quarterly fall since 1979,” said Jonathan Athow, the deputy national statistician with the ONS.

“All main sectors of the economy shrank significantly in March as the effects of the pandemic hit,” he added.

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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