The U.K. government warned Wednesday of a “significant” recession after official figures showed the economy shrank 2% in the first quarter of the year even though it included just one week of the coronavirus lockdown.
The Office of National Statistics found that the slump was getting deeper as the quarter came to an end, with output down by 5.8% in March alone, the month when curbs on everyday life started being put in place by the British government. Prime Minister Boris Johnson put the U.K. into full lockdown on March 23, days after closing pubs and restaurants and schools.
The March figure illustrates the scale of the coronavirus slump to come, with the Bank of England, for example, warning of the biggest annual slump since 1706.
“With the arrival of the pandemic, nearly every aspect of the economy was hit in March, dragging growth to a record monthly fall,” said statistician Jonathan Athow.
During March, the only sectors that did grow reflected the needs of a country dealing with a pandemic – IT support, soaps and cleaning products, and the manufacture of pharmaceuticals.
The quarterly decline is the biggest recorded since the fourth quarter of 2008 at the height of the global financial crisis. Since 1955, when equivalent records began, there have only been four quarters worse.
Like others, the British economy is set for a recession of unprecedented proportions, with many economists predicting that the second quarter could see economic output shrink by a quarter, or even more.
Last week, the Bank of England warned that the British economy could fall by around 30% in the first half of the year, before a strong recovery in the second half of the year, leaving it 14% smaller by the end of 2020. Still, even with that predicted second-half recovery, the annual fall would be the biggest in over 300 years.
Much of the British economy has been mothballed over the past couple of months, with many sectors unlikely to open again for months.
In addition to the 2 million estimated to be unemployed, around 7.5 million people have become economically inactive since the lockdown via the Coronavirus Job Retention Scheme, which sees the government pay up to 80% of the salaries of workers retained, up to 2,500 pounds ($3,075) a month. On Tuesday, Treasury Chief Rishi Sunak extended the scheme for a further four months until October, though he suggested that firms will have to start paying a share.
Sunak told the BBC after the release of Wednesday’s figures that it is “very likely” the country will face a “significant” recession.
The government is hoping that it can reopen large parts of the economy as soon as possible in order to limit the scale of the slump. The depth of the recession — and the subsequent recovery — will depend on how long the lockdown measures remain in place.
Some of the lockdown measures are being relaxed in England on Wednesday, with those workers who are unable to work from home, such as those in construction and manufacturing, encouraged to return to work. In addition, a number of recreational sports can reopen. In all cases, social-distancing rules have to be observed.