UK economy shrinks by a quarter during tough quarantine
The UK economy shrank by a quarter between March and April as entire sectors were closed due to strict coronavirus quarantines, hitting bottom after a “catastrophic” disruption before a long and slow recovery.
During the downturn, the economy contracted 20.4% in March compared to March, when it contracted nearly 6%. This is 24.5% less than in April 2019.
Both indicators were below unprecedentedly weak forecasts presented in a survey of economists by Reuters.
«This is a disaster on a scale never seen before in history, said the director of the think tank at the Institute for Fiscal Research (IFS) Paul Johnson. – The real problem is what comes next».
Minister of Finance Rishi Sunak stated: «Like many other economies in the world, the coronavirus is having a serious impact on our economy.».
However, the Organization for Economic Co-operation and Development (OECD) says Britain – with its huge service industries that have been hit hard by social distancing measures – could experience the worst recession of any country in the organization, with a decline of 11.5% this year..
The £ 133 billion ($ 168 billion) spent on additional spending and tax cuts means the UK has a very good chance of a quick economic recovery, Sunak said..
Most of the UK retail sector is due to open its doors next week. The government last month urged people who were unable to do their jobs at home to return to work as lockdowns are slowly being lifted..
Governor of the Bank of England Andrew Bailey, who warned of the deepest recession in three centuries this year, said Wednesday that there may be some signs of recovery, but long-term economic damage remains very likely.
The Bank of England is expected to announce a new increase in bond purchases of at least £ 100bn next week.
IFS’s Johnson told Sky News that the drop could be short if about a third of temporarily laid-off private sector workers can return to work, consumers get out and spend money again, and Britain avoids a second wave of COVID-19..
But unemployment is more likely to rise sharply as the government’s wage subsidy scheme ends in October, leaving many workers to fall in income. Britain will be in fever until 2021 with risk of Brexit shock on the horizon, expert said.
Britain formally withdrew from the European Union at the end of January, but little has changed in its relations with the European bloc during the transition period, which will last until the end of the year. Negotiations for a comprehensive agreement on the future relationship have barely progressed since February.
According to ONS, production in the dominant service sector fell 19.0% in April compared to March, while production fell more than 24% and construction nearly halved..
In the three months to April, the UK economy contracted 10.4% over the previous three months.
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