UK GDP shrinks by 2% amid Covid-19 crisis, biggest quarterly decline since 2008

Representational Image | Photo: Simon Dawson | Bloomberg

London: The UK’s economy shrank by 2 per cent in the first three months of the year till the end of March, the biggest quarterly decline since the global financial crisis of 2008, reflecting the financial effects of the coronavirus-induced economic lockdown.

“The impacts of the coronavirus were seen right across the economy, with nearly all sub-sectors falling in the three months to March,” the Office for National Statistics (ONS) said on Wednesday.

The fall was the biggest since the financial crisis of 2008 and included a contraction of 5.8 per cent in the March GDP alone, the biggest monthly fall on record, according to the latest statistics from the ONS.

There was zero growth in the final quarter of 2019, with the UK’s dominant services sector hit by a record decline.

“This is the largest quarterly contraction since the global financial crisis and reflects the imposing of public health restrictions and voluntary social distancing put in place in response to the COVID-19 pandemic,” the ONS said.

The figures include a 1.9 per cent fall in the services sector which accounts for around 80 per cent of the UK’s GDP a 2.1 per cent fall in production and 2.6 per cent fall in construction. The figures are the first step towards a recession, which requires two consecutive negative quarters.

They come a day after the UK’s Indian-origin finance minister, Rishi Sunak, announced a further four-month extension to the country’s Coronavirus Job Retention Scheme until October, under which employees can be furloughed, or put on forced leave, with the help of grants from the government.

I won’t give up on the people who rely on the Coronavirus Job Retention Scheme, Sunak told the House of Commons.

We stood behind Britain’s workers and businesses as we came into this crisis, and we will stand behind them as we come through the other side, he said.

The extension, which has saved millions of jobs, has been widely welcomed but there are also concerns over financing of such an unprecedented level of state-funded bailout.