UK Falls Into Recession For The First Time In 11 Years

The UK suffers its biggest slump on record, as the pandemic and lockdown measures ravage the economy.

Photo: No 10 press office

The coronavirus has taken a toll on the UK economy; the country suffered its biggest slump on record between April and June, officially pushing it into recession for the first time in 11 years. 

The UK economy shrank 20.4% compared with the first three months of the year as a result of coronavirus lockdown measures. Shops were ordered to remain closed while factory and construction output declined. The UK’s last recession, defined as two consecutive quarters of economic decline, was in 2009.

As the short-term and long-term effects of the recession loom overhead, politicians seek something or someone to blame. 

While Chancellor Rishi Sunak told the BBC that the government is “grappling with something that is unprecedented,” Chancellor Anneliese Dodds cast the blame on Prime Minister Boris Johnson. "A downturn was inevitable after lockdown - but Johnson's jobs crisis wasn't," she said.

Boris Johnson warns 'long, long way to go' for economy

Between April and June, the number of people in work fell by 220,000, according to the Office for National Statistics.

Though the economy bounced back in June as lockdown measures were lifted, there still is a need for significant repair in order to achieve pre-pandemic figures. 

According to the ONS, the economy grew 8.7% in June, a notable improvement from the 1.8% growth in May. Jonathan Athow, deputy national statistician for economic statistics, said, "Despite this, gross domestic product (GDP) in June still remains a sixth below its level in February, before the virus struck."

The services sector — run by shops, hotels, schools, and restaurants — powers four-fifths of the economy. It is also the sector that suffered most as a result of coronavirus. Factory shutdowns also resulted in the slowest car production since 1954. 

Prime Minister Johnson said, “Clearly there are going to be bumpy months ahead and a long, long way to go" and added that he has "absolutely no doubt" the government can "help this country get through it." 

While the timeline for economic recovery remains unclear, economists are doubtful that the worst is over.  

The lull before the storm

Ruth Gregory, senior UK economist at Capital Economics, said the latest unemployment figures were "the lull before the storm."

"The cracks evident in the latest batch of labour market data are likely to soon turn into a chasm, with the unemployment rate rising from 3.9% to around 7% by mid-2021," she continued.

Capital Economics predicts that the unemployment rate will peak at 7% in mid-2021 and remain above its pre-pandemic level of 4% until the end of 2022. 

Jeremy Thomson-Cook, chief economist at Equals Money, said the unemployment figures showed the efficacy of the government's furlough scheme but he agreed that the worst lay ahead. 

"Unfortunately, the end of the furlough scheme will present a cliff-edge, statistically and economically, for those currently relying on government support to make up their wages,” he said.

The UK’s slump is one of the biggest among advanced economies, according to preliminary estimates. The economy is more than a fifth smaller than it was at the end of last year — about twice the size of contractions in Germany and in the US.

As compared to other European countries, the UK’s economy relies more on services, hospitality and consumer spending, making it more susceptible to the downfalls of the pandemic. 

Chancellor Dodds said, "We've already got the worst excess death rate in Europe - now we're on course for the worst recession too. That's a tragedy for the British people and it's happened on Boris Johnson's watch."

 

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