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Wednesday Sep 30 2020

Damaged by COVID-19, Britain's economy shrinks by 19.8% in 5th quarter

Masked paramedics inside an ambulance in London. Photo: AFP

LONDON: Revised data showed on Wednesday that Britain's economy had shrunk by 19.8% in the fifth quarter due to the novel coronavirus pandemic. 

Gross domestic product contracted by a record 19.8% in the April-June period, the Office for National Statistics (ONS) said in a statement that revised its initial figure of a 20.4% slump.

The economy also declined by 2.5% in the first quarter, the ONS added. That was however worse than the previous figure of a 2.2% decline.

The grim data confirmed Britain has entered a recession with two successive contractions in economic activity, sparked by a nationwide lockdown on March 23 that was not relaxed fully until early June.

"While it is still true that these early estimates are prone to revision, we prefer to focus on the magnitude of the contraction that has taken place in response to the coronavirus pandemic," the ONS said.

"It is clear that the UK is in the largest recession on record," it added, noting also that the global health emergency had sparked record declines in economic activity around the world in the second quarter.

"The latest estimates show that the UK economy is now 21.8% smaller than it was at the end of 2019, highlighting the unprecedented size of this contraction," the ONS concluded.

During the second quarter, all sectors of the shattered economy suffered massive output falls.

Household spending plunged by 23.6% as most Britons stayed at home under lockdown, while business investment fell 26.5 percent.

Construction activity nosedived 35.7%, manufacturing sank 21.1%, services dropped 19.2% and industrial production lost 16.3%.

More than 42,000 people who have tested positive for COVID-19 have so far died in Britain, the worst death toll in Europe.

There are fears that new restrictions aimed at preventing a second nationwide lockdown could snuff out an expected fragile recovery in the third quarter.

British Prime Minister Boris Johnson last week tightened restrictions to stem a surge of coronavirus cases, ordering pubs to close early and advising people to go back to working from home.

"The renewed COVID-19 restrictions will probably mean that GDP stagnates in Q4," said Capital Economics analyst Ruth Gregory.

"And the risk now is that renewed containment measures send the recovery into reverse."

Economists are also fearful that Britain could experience spiking unemployment after the government's furlough jobs scheme  — under which it subsidises private sector wages — ends in October.