LONDON: Chancellor Rishi Sunak has said it is “very likely” the UK is in a “significant recession”, as figures show the economy contracting at the fastest pace since the financial crisis. The economy shrank by 2% in the first three months of 2020, as coronavirus forced the country into lockdown.
Rishi Sunak told the BBC that just “a few days of impact from the virus” in March pushed the economy into decline. Economists expect an even bigger slump in the current quarter. Mr Sunak said: “It is now very likely that the UK economy will face a significant recession this year, and we’re already in the middle of that as we speak.”
The first quarter drop was driven by a record fall in March output, and comes after the economy stagnated in the final quarter of 2019. On Tuesday, Mr Sunak announced an extension of the furlough scheme subsidising wages to the end of October. He said Wednesday’s GDP data underlined why the government had taken “unprecedented action” to support jobs, incomes and livelihoods” at a time of severe disruption.
The Bank of England has already warned that the UK economy is likely to suffer its sharpest recession on record this year, even if the lockdown is completely lifted by the end of September. While the Bank said the economy could shrink by 14% in 2020, it expects the downturn to be short and sharp, with growth of 15% predicted in 2021.
The decline is also expected to be less prolonged than during the financial crisis, when the economy kept shrinking for more than a year. The economy also took five years to get back to the size it was before the meltdown.
The Office for National Statistics (ONS) said there had been “widespread” declines across the services, manufacturing and construction sectors. This includes a record 1.9% fall in services output, which includes retailers, travel agents and hotels.