The United Kingdom has witnessed one of its worst GDP contraction during Q2 2020 owing to lockdowns initiated by the government after the outbreak of the coronavirus pandemic. Job losses are on a steep rise as the U.K. economy shows little of recovery in the near term.
Coronavirus lockdowns take a huge toll on the UK economy as its contracts 20.4% during Q2 2020. As per the figures released on Wednesday, August 11, the UK has plunged into a recession with two consecutive quarters of contraction.
The second-quarter contraction is the worst on record for the world’s sixth-biggest economy. Besides, it a major slip from the 2.2% contraction in the first quarter. Britain’s GDP shrunk by a record of 20.4% during April 2020 following a meek 1.8% recovery in May. As the government eased the lockdown measures in June, the GDP expanded 8.7% during that month.
As per the Reuter’s poll conducted, analysts expected a fall of 20.5% during the second quarter. Jonathan Athow of the Office for National Statistics (ONS) said:
“The recession brought on by the coronavirus pandemic has led to the biggest fall in quarterly GDP on record. The economy began to bounce back in June… Despite this, GDP in June still remains a sixth below its level in February, before the virus struck. Overall, productivity saw its largest-ever fall in the second quarter. Hospitality was worst hit, with productivity in that industry falling by three-quarters in recent months.”
The sectors exposed to government restrictions saw a record fall during Q2. This included sectors like construction services and production.
Bank of England Warns about Rising Unemployment in UK due to Recession
The uncertainty in the global markets is currently at its peak as the Coronavirus cases look to be stopping nowhere. Although Russia has claimed to produce the first COVID-19 vaccine, things are yet to roll over. The economic recovery for the U.K. and the world looks to be a distant dream.
Last week, Britain’s central bank has warned on a sharp rise in unemployment. Citing much deeper woes ahead, the Bank of England said that it will take until the end of 2021 for the economy to regain its previous size. Britain’s finance minister, Rishi Sunak said:
“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.”
The ONS said that it estimates a greater than usual uncertainty in the market. Besides, public health restrictions has made it even more difficult to gather data at this stage. As per the data released by ONS this Monday, nearly 73000 workers are out of the payrolls of the British companies since March 2020.
The Bank of England has already added that the unemployment rate can shoot to 7.5 percent from the existing 3.9 percent.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
