Home News Coronavirus: UK economy records sharpest decline in 300 years, Boris Johnson rattled

Coronavirus: UK economy records sharpest decline in 300 years, Boris Johnson rattled

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UK economy
Uk economy-Office for Statistics

Britain’s coronavirus-ravaged economy slumped almost one-fifth during the country’s lockdown and remained set for its sharpest decline in annual output for 300 years, official data showed Tuesday.

The Office for National Statistics (ONS) said gross domestic product plunged 19.1 percent in the three months to the end of May “as government restrictions on movement dramatically reduced economic activity”.

The Office for Budget Responsibility, in charge of the government’s economic forecasts, said the “UK is on track to record the largest decline in annual GDP for 300 years”, estimating that the economy could shrink by as much as 14.3 percent in 2020.

The Bank of England had already forecast that the UK economy could have its sharpest annual contraction in centuries.

GDP output grew 1.8 percent in May from April as the government began to ease restrictions, particularly boosting construction and manufacturing.

May’s data “is a disappointing first step on the road to recovery and suggests that hopes of a rapid rebound from the lockdown are wide of the mark”, noted Capital Economics analyst Thomas Pugh.

“Indeed, the path to full economic recovery will probably be much longer than most people anticipate.”

Just three months after the Conservatives won a large majority in last December’s election, the pandemic derailed their plans for overhauling the U.K. economy to “level up” forgotten regions of the country.

It forced Johnson instead to commit hundreds of billions of pounds to rescue private companies and pay workers’ wages. These big state, big spending interventions alarmed free marketeers in the party and threw Johnson’s tribe into a full-scale identity crisis.

On Tuesday June 30th 2020, UK Prime Minister Boris Johnson gave his response: the Conservative Party isn’t in crisis, it is changing for good.

The traditional Tory instinct to balance the nation’s books is now not the priority and state spending will continue to flow. “We will not be responding to this crisis with what people called austerity,” Johnson said. “We are not going to try to cheese-pare our way out of trouble.”

But will this strategy work? With this latest news from the Office for National Statistics, this remains to be seen.

How the Uk Economy is recovering

The UK economy remains about 24.5 percent below its size in February before the pandemic spread.“Manufacturing and house-building showed signs of recovery as some businesses saw staff return to work,” said Jonathan Athow, deputy national statistician at the ONS, in reference to the May data.“Despite this, the economy was still a quarter smaller in May than in February, before the full effects of the pandemic struck.“In the important services sector we saw some pick-up in retail, which saw record online sales.
“However, with lockdown restrictions remaining in place, many other services remained in the doldrums, with a number of areas seeing further declines,” Athow added.The OBR said in a worst-case scenario, British GDP would recover to pre-crisis levels only in the third quarter of 2024.

Britain has been one of the countries worst hit by the virus, with nearly 45,000 deaths from positive coronavirus cases, according to an official government tally.

Broader statistics taking into account suspected cases put the death toll at more than 50,000.

Britain is in the final stages of rolling back nationwide coronavirus restrictions imposed on March 23.

Meanwhile, facemasks are to become compulsory in shops and supermarkets in England from next week, the government said on Tuesday, in a U-turn on previous policy.

Additional reports from Bloomberg and The Guardian NG

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