The UK economy contracted by 2 per cent in the first quarter of 2020 after plunging 5.8% in March – the largest fall on record – as analysts expect far worse to come.
The first quarter fall was the worst since the end of 2008 at the height of the financial crisis, while the March monthly drop marked a record tumble.
The latest figures – from the Office of National Statistics – show the first direct effect of the Covid-19 pandemic on the UK economy after the country was placed in lockdown to control the spread of the virus.
But with the lockdown only coming into place on March 23, the second quarter will show the full hit on the economy after the UK ground to a standstill.
The shocking figures come just a day after Chancellor Rishi Sunak extended the job subsidy scheme until the end of October as he conceded yesterday that the UK is already in recession.
Today, markets reacted to dire economic data as the FTSE 100 index of Britain’s biggest companies fell nearly 1 per cent on opening in London this morning – down 56 points to 5,939.
Jonathan Athow, deputy national statistician for economic statistics at the Office for National Statistics (ONS), told BBC’s Today programme there could be worse to come in the second quarter.
He said: ‘The Bank of England have put out a scenario saying perhaps there might be a 25% fall in GDP in the second quarter, that would be nine or TEN times the record level of fall we’ve seen.
‘In terms of scale, in terms of speed, this is really, really unprecedented.’
The shocking figures come just a day after Chancellor Rishi Sunak extended the job subsidy scheme until the end of October as he conceded yesterday that the UK is already in recession
He also said that although two per cent ‘doesn’t sound large’ historically it’s ‘pretty big.’
He added: We’ve only ever had four quarters in our entire records going back to 1955 where we’ve seen a bigger fall.
‘And, if you look beneath the surface, as you say this is for the first quarter, the first three months, if you look at March, the fall in March itself was just under 6% which is a really, really sizeable fall, again noting that the restrictions only came in part way through March.’
Mr Athow said it was the largest monthly fall they had ever recorded, and the statistics go back to 1955.
He added: ‘The reason we’re looking at the march numbers is because these figures only show the first week of the lockdown.’
In a statement released with the figures Mr Athow said that the services and construction industries saw record declines on the month. With education car sales and restaurants also falling.
The FTSE 100 fell by 1 per cent at opening this morning as it reacted to the dire economic data
A graph released by the ONS today shows widespread contractions across a number of sections of the UK economy
He added: ‘Although very few industries saw growth, there were some that did, including IT support and the manufacture of pharmaceuticals, soaps and cleaning products.
‘The pandemic also hit trade globally, with UK imports and exports falling over the last couple of months, including a notable drop in imports from China.’
Mr Sunak yesterday said the scheme, which sees the taxpayer subsidise 80 per cent of wages up to a maximum of £2,500 a month, is already supporting an astonishing 7.5million jobs.
He told MPs that the scheme would continue ‘completely unchanged’ until the end of July – despite warnings it could cost taxpayers more than £80billion.
After that, people who have been furloughed will continue to receive 80 per cent of their wages, but their employer will be asked to make a contribution towards the cost.
The scheme will also be tweaked to allow furloughed staff to start returning to work part-time from as little as one day a week – an idea that has been a key demand of business.
Mr Sunak told the BBC: ‘We already know that many people have lost their jobs and it breaks my heart.
‘We’ve seen what’s happening with Universal Credit claims already. This is not something that we’re going to wait to see, it’s already happening.
‘There are already businesses that are shutting. There already people who have lost their jobs. That’s why I’m working night and day to limit the amount of job losses.’