ZCZC
BCN-07
VIRUS-BRITAIN-ECONOMY-INDICATOR
UK economy shrinks on coronavirus
LONDON, May 13, 2020 (BSS/AFP) – Britain’s economy shrank two percent in
the first three months of the year, rocked by the fallout from the coronavirus
pandemic, official data showed Wednesday, with analysts predicting even worse
to come.
Gross domestic product shrank in the first quarter compared with the prior
three months in the largest slump since the global financial crisis in the
fourth quarter of 2008, the Office for National Statistics revealed.
Economic output dived by a record 5.8 percent in March from the previous
month, the ONS noted in especially grim news which sent the London stock
market down more than one percent in early deals.
“March’s GDP figures showed that the UK economy was already in freefall
within two weeks of the (coronavirus) lockdown going into effect,” said
Capital Economics analyst Ruth Gregory.
“And with the restrictions in place until mid-May and then only lifted very
slightly, April will be far worse.”
Britain implemented its COVID-19 lockdown — which is only just starting to
be slowly eased — on March 23.
– ‘Widespread disruption’ –
“This release captures the first direct effects of the coronavirus pandemic,
and the government measures taken to reduce transmission of the virus,” the
ONS said in a statement.
“There has been a widespread disruption to economic activity,” it added.
The first-quarter performance was better than France and Italy, which shrank
by 5.8 percent and 4.7 percent in the same period. Both nations were hit hard
by the pandemic — but they began lockdowns earlier than the UK.
The Bank of England (BoE) had already warned last week that the economic
paralysis could lead to Britain’s worst recession in centuries.
“With the arrival of the pandemic, nearly every aspect of the economy was
hit in March, dragging growth to a record monthly fall,” said Jonathan Athow,
deputy national statistician for economic statistics at the ONS.
“Services and construction saw record declines on the month with education,
car sales and restaurants all falling substantially.”
“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.”
The BoE had forecast last week that UK output was likely to crash by 14
percent this year.
– Furlough extended –
As the nation’s coronavirus crisis deepened, finance minister Rishi Sunak
has unveiled a series of massive packages to help those affected.
The government stepped in to back up employee wages in a so-called
“furlough” jobs retention plan, while it also gave tax holidays to businesses
and boosted welfare payments.
Sunak on Tuesday announced a four-month extension to the furlough scheme,
which will now run until the end of October.
The government says 7.5 million jobs have already been supported by the
plan, which ensures employees can receive 80 percent of their pay up to œ2,500
($3,100, 2,800 euros) a month.
The BoE has also been at the forefront of economic firefighting, slashing
its main interest rate to 0.1 percent and pumping œ200 billion ($244 billion,
226 billion euros) into the UK economy to get retail banks lending.
Prime Minister Boris Johnson began this week to relax some of lockdown
measures in order to help the economy, despite the rising death toll, but he
has also stressed that great caution is needed.
Changes in the lockdown guidelines — which come into force Wednesday —
will allow people in England to spend more time outside, meet a friend at the
park and view property for sale. However, they remain unable to visit
relatives or friends at their homes.
Britain has seen more than 32,000 deaths in the outbreak — the worst in
Europe and second only to the United States — although there are indications
that the true toll is higher.
BSS/AFP/MMA/1603HRS