UK recession and rising unemployment
Could we already be in a significant UK recession?
The British economy contracted by 2% in the first quarter the year, as the coronavirus pandemic led to a lockdown.
This decline in the size of the economy was driven by an output drop during a few days in March.
An even bigger economic decline is forecast for the second quarter when two consecutive quarters of contraction will result in a recession.
Significant UK recession
Speaking to the BBC earlier today, Chancellor Rishi Sunak said it was highly likely the UK is already in a significant recession. He said:
It is now very likely that the UK economy will face a significant recession this year, and we’re already in the middle of that as we speak.
The first-quarter economic fall follows a stagnant economy in the final quarter of last year.
Commenting on today’s GDP figures, Jonathan Athow, Deputy National Statistician for Economic Statistics, said:
With the arrival of the pandemic nearly every aspect of the economy was hit in March, dragging growth to a record monthly fall.
Services and construction saw record declines on the month with education, car sales and restaurants all falling substantially.
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.
Rain Newton-Smith, CBI Chief Economist, said:
The UK economy was hit hard by the necessary shutdown at the end of March, and recent data suggests the full impact of that difficult decision is still yet to come.
The range of financial support for businesses and workers provided by the government has been a lifeline for many firms so far. These schemes are critical in keeping companies afloat and they will need to adapt as the economy restarts.
Reopening our economy will be a gradual, complex process. The Government’s new guidance has helped, giving businesses some flexibility for their individual circumstances. Ultimately, keeping health at the heart of a recovery plan will be key to sustaining an economic revival.
Separately, official figures show the Organisation for Economic Co-operation and Development (OECD) unemployment rate rose to 5.6% in March 2020, up from 5.2% in February 2020.
This rise in unemployment in the OECD reflects the impact of the Covid-19 pandemic, and early data for April signals an unprecedented increase.
The number of unemployed across the OECD area, which now includes Colombia, rose by 2.1 million to 37 million in March.
The rise was particularly marked among women and young people aged 15 to 24.
Female unemployment increased by 0.5 percentage points (to reach 5.8%) compared with an increase of 0.3 percentage point for men (to 5.3%), while youth unemployment picked up by 1.0 percentage point, to 12.2%.