Britain is to be officially declared in recession for the first time since the 2008 financial crisis with figures set to show the COVID-19 crisis triggered a record economic slump.
After a decline of 2.2% in the first quarter, the latest snapshot will confirm the UK economy’s decline into recession after the outbreak spread in March and the government imposed a nationwide lockdown to contain it..
A recession which is two successive quarters of decline in gross domestic product (GDP) has not been seen in the UK since the financial crisis back in 2008. It comes after separate data showed around 730,000 jobs in the UK been lost since March when the coronavirus lockdown began, bringing the economy to a near standstill. Employment also nose-dived by the largest amount in a quarter since 2009 between May and June.
However, despite the expected GDP slump, experts will be examining closely the monthly figure for June with predictions it will show a sharp 8% rebound as COVID-19 lockdown restrictions were eased further. This follows a much lower than expected 1.8% month-on-month rise in May.
The Bank of England said last week that while it expects the downturn to be less severe than first feared, the UK could take longer to recover than previously thought .It forecasted GDP to shrink by 9.5% this year, having warned in May of a 14% fall in 2020.
This resulted in a near-doubling of the national debt, and a decade-long programme of austerity. There were steep cuts in many areas of government spending, except health, education and international aid.
Philip Shaw, chief economist at Investec Bank, said:
“We are forecasting a monthly increase of 8.1% as more of the economy, such as ‘non-essential’ retailing, opened up in mid-June.”
He added: “July’s figures next month should contribute strongly to a material rebound in the third quarter, but the test will come in the autumn when there are no further ‘lockdown releases’ to boost the economy, some restrictions are imposed and programmes such as the furlough scheme are wound up.”
The International Monetary Fund (IMF) predicts huge falls in GDP for 2020 as a whole, with an extraordinary fall of 8.0% for the US and 10.2% for the UK. It estimates the entire world economy will shrink by 4.9% this year, making it the worst recession since the Great Depression in the 1930s’.
People are expected to lose their jobs, or find it harder to get promotions or a pay rise with graduates and school leavers finding it harder to get a first job.
The IMF also predicts the recession will be over next year and the world economy will start bouncing back, but no one knows how strong that recovery will be.
If all the businesses which shut during the pandemic reopen quickly, the consequences would be less severe. However, there are fears over future spread of the virus, and people may not want to travel or go out, so the consequences will be felt for many years.
