UK economy contracts by 20% under Covid-19 lockdown

By FIN24
THE United Kingdom economy suffered worse than any other major European nation during the coronavirus lockdowns, posting a 20.4% contraction in the second quarter that will raise more questions over the government’s handling of the pandemic.

The record slump, after a 2.2% drop in the first three months of the year, also outstripped the US downturn and officially pushed Britain into its first recession since 2009. It follows a report Tuesday that showed hundreds of thousands of people have lost their jobs.

The figures add to evidence Britain is paying a heavy price for being slower than most of its peers to enter a lockdown in March. The country also has Europe’s highest death toll from the coronavirus.

The drop in GDP exceeded the 18.5% recorded in Spain, the worst-performing country in the European Union. The US economy shrank 9.5% in the same period.

While a recovery is underway as restrictions are eased – U.K. output jumped 8.7% in June – there are worrying signs that it could soon run out of steam.

Localised jumps in infections have heightened concerns over more shutdowns, government wage support is being phased out, and companies face higher tariffs should Britain fail to agree to a trade deal with the European Union by the end of the year.

The Bank of England has highlighted the labour market as a key concern, with officials fearing a jump in unemployment when government job support is withdrawn later this year. Data Tuesday showed the number of employees on payrolls is already down around 730 000 compared with March.