UK falls into deepest ever recession

News that the UK has officially fallen into recession doesn’t come as a surprise, but the scale of the retraction in the economy means it’s the largest UK recession ever. The UK economy shrank by 20.4% in the second quarter as the country fell into lockdown and businesses shut their doors.

The figure for June is key, as we all knew that lockdown measures would have a big impact on the economy but what we still don’t know is how quickly the UK will rebound. Figures showing GDP growth of 8.7% in June are encouraging – albeit this is coming from a very low base after the falls in May and still sits far below the pre-Covid figures from February. But July figures are expected to be more positive still, as more businesses re-opened and people emerged from their houses to start spending.

The biggest impact of any recession on households will be job losses. Unemployment figures released yesterday showing that three-quarters of a million fewer people were working in July compared to March confirm that the crunch of the recession is already being felt by many. The Bank of England expects this figure to jump further as the Government’s furlough scheme is unwound and estimates around 2.5 million people will be unemployed by Christmas, meaning more pain is still to come.

A second wave of the virus will hamper any rebound, as will the effect of some of the localised shutdowns we’ve seen in recent weeks. The much-talked-about V-shaped recovery of the UK economy relies on no second lockdown and also on UK trade talks being successful – presenting two large uncertainties.

Read the latest UK GDP figures

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