The economy of the UK has faced its highest fall on record between April and June 2020 due to the coronavirus lockdown measures which has pushed the country officially into recession.

The announcement of the recession took place on Wednesday 12 August. It records the deepest recession among other top economies with GDP plunging more than a fifth at the height of the outbreak. 

The GDP shrank by a shocking 20.4% compared with the first three months of the year. It is considered to be the biggest and the steepest fall in modern history, with record reductions in construction, services and production. 

The U.K. economy is now in recession following a 2.2% contraction in the first three months of the year, generally defined as two quarters of contraction.

How is the UK doing compared to other nations?

The economy in 2020 is now more than a fifth smaller than it used to be at the end of 2020. Compared to other countries the UK stands in the second position to get hit by the recession. Other countries, such as Italy, Spain, and France had locked down their economies faster than the UK resulting in more of the economic hit coming in their first quarter.

This fall is about twice the size of contractions in Germany and the US but not as bad as the 22.7% decline in Spain. A slump like such has not been seen in the history of the UK since 2008 and 2009 during the global financial crisis. The economy shrank by one fifth in the second quarter, more than any European neighbour.

Source: The Daily mail

Which sectors have suffered the most?

According to the Office for National Statistics (ONS), the collapse in output was driven by the closure of:

     • shops, 

     • hotels, 

     • restaurants, 

     • schools

     • and car repair shops.

The services sector suffered the biggest quarterly decline on record, which powers four-fifths of the economy. 

How are people in the UK getting affected?

In the UK, hundreds of thousands of people have already lost their jobs. Based on the ongoing situation, in the coming months many more will lose their jobs. 

Official jobs reports published on Tuesday showed the number of people in work fell by 220,000 between April and June.

Even for the jobs available, the competition is higher than ever now. Hundreds of applications are being submitted online for each job available. 

As shops were ordered to close, household spending plunged. Similarly, the factory and construction output also decreased.

What are the chances of things getting better?

As a silver lining, manufacturing, services and construction output accelerated sharply in June, helping the economy expand by 8.7%. It grew in June, after growth of 1.8% in May on a month-on-month basis.

However, the deputy national statistician for economic statistics, Jonathan Athow said, “despite this the gross domestic product (GDP) in June still remains a sixth below its level in February, before the virus struck.”

The Office for National Statistics (ONS) reports that even though all three sectors expanded, they are still significantly smaller than before the lockdown as following:

     • Industrial production grew 9.3% in June, but 11.6% below the level of February 2020

     • Services sector grew 7.7% in June, but output is 17.6% below the level of February

     • Manufacturing grew 11% in June, but 14.2% below February’s level

     • Construction grew 23.5% in June, but 24.8% below February’s level

Source: Metro 

What is the government doing about it?

The economy started to bounce back during June with factories beginning to ramp up production, house-building continuing to recover and shops reopening.

Additional measures were taken by the UK government such as - the reopening of pubs and restaurants and a return to offices which will further fuel the recovery.

The government started providing grants to boost the health of businesses and help unemployment. Check our blog - Government Coronavirus Measures to learn more. 

Where can you get help from?

We have come up with the necessary grants in our blogs from which you can get help as per your requirement. You can also contact your local Accountants in London to guide you through the way to apply to any grants. For any enquiry or advice, you can always rely on Taj Accountants as your trusted Small Business Accountants in London.