By Adedapo Adesanya
The United Kingdom has officially entered a recession after its gross domestic product (GDP) plunged in the second quarter of the year by 20. 4 per cent.
This makes it the first time this is occurring in 11 years after the effects of the 2008-2009 financial crisis.
The second-quarter plunge is the worst on record and follows a 2.2 per cent contraction in the first quarter. Two consecutive periods of contraction mean the British economy is now in a technical recession.
This was primarily caused by the coronavirus-induced lockdowns which affected activities especially in the month of April, which is often described as the height of the pandemic.
According to the UK’s Office for National Statistics (ONS), the economy expanded by 8.7 per cent in June as government lockdown measures eased, having recovered by 1.8 per cent in May following April’s 20.4 per cent contraction, the largest fall in the second quarter of the year.
The ONS said the collapse in output was driven by the closure of shops, hotels, restaurants, schools and car repair shops.
In the country, the service sector drives 80 per cent of the economy and due to disruptions, it suffered the biggest quarterly decline on record.
The ONS added that sectors most exposed to government restrictions such as the service, construction and production also saw record quarterly falls.
Britain’s quarterly contraction is by one of the deepest among comparable advanced economies, only beaten by Spain with a 22.7 per cent contraction. In France, GDP contracted by 13.8 per cent, Italy 12.4 per cent, Germany 10.1 per cent, Canada 12 per cent, the U.S. 9.5 per cent, and Japan 7.6 per cent.
Projections have noted there is an expectation of a sharp rebound in the third quarter as the burden of lockdowns diminishes, as long as the country avoids a second wave, the Bank of England has forecast an 18 per cent Q3 jump.
With the 8.7 per cent growth made in June, this is a sign that this will be possible. However, faced by job losses and the deadline of the Brexit transition period at the end of the year, these are expected to weigh on the recovery in the fourth quarter.
Business Post Contributor