ON the day that Boris Johnson, the Prime Minister, is setting out the government’s plans for an ”infrastructure revolution” updated figures released by the Office for National Statistics (ONS) covering the first three months of 2020 showed gross domestic product (GDP) fell by 2.2% compared with the previous quarter.
In March GDP fell by almost 7% even though the COVID lockdown only came into force with just nine days left of the month.
These figures show that the economy had endured its worst quarterly fall since 1979.
The ONS also has previously reported a decline of 20.4% in GDP covering April alone – signalling the deepest slump in living memory as the effects of the UK lockdown are realised, despite government support for businesses and wages.
It is becoming evident that the UK economy is contracting at a sharper rate than initially thought and is on course for its deepest recession in modern times.
The ONS data also revealed that the current account deficit – a measurement of trade where the value of the goods and services it imports exceeds the value of the products it exports – widened by more than expected over the three months. The balance of payments deficit grew to £21.1bn, some £5bn more than was expected.
However, today’s published figures are forecasted to be nothing compared to when the data covering April to June are published.
All main sectors of the economy shrank significantly in March with the closure of bars, restaurants, and shops having an even bigger impact than first estimated. Production output also dropped by 1.5% and construction by 1.7%. Also, information from the government reveals that health activities declined more than anticipated
The PM and Chancellor both having ruled out a return to the post-2009 financial crisis, ten years era of austerity, attention will now turn to how the government will respond in the coming weeks.
The Office for Budget Responsibility (OBR) has published a scenario where Britain’s economy could shrink by 35% in the second quarter and see unemployment jump by two million
The big increase in joblessness would take the unemployment rate up to 10%, a level not seen since the early 1990s. The rate currently stands at 3.9%.
The OBR scenario also sees government borrowing for 2020-21 climbing by £218bn to £273bn, or 14% of GDP – the largest single-year deficit since the Second World War.