UK economy dropped 2.2% in first three months of 2020 – the largest fall since 1979

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THE UK economy crashed by 2.2 per cent in the first three months of the year in the joint-biggest fall since 1979.

It’s worse than had been predicted with growth falling by an extra 0.1 per cent, and down 1.7 per cent compared to the same period last year.

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The Office of National Statistics said today that the data changed after the economy plunged by a record 6.9 per cent in March.

The latest figures show the first direct effects of the coronavirus pandemic but not the full impact of lockdown.

Data for the second quarter of the year is expected to be worse, after the economy shrank by a record 20.4 per cent in April.

It comes as the Prime Minister is expected to make a major speech on the economy later today.

Household spending dropped by 2.9 per cent between January and March this year, down by 1.2 per cent from what experts had estimated.

It’s the worst decline in household spending since the Winter of Discontent in 1979, when there were widespread trade union strikes which brought on a recession in the early 1980s.

But households saved more of their disposable income in the first three months of 2020 as a result of the closure of all non-essential shops on March 23.

Around 8.6 per cent of disposable income went into savings compared to 6.6 per cent in previous quarter.

Consumer spending also fell by 2.7 per cent – equal to around £9.5billion – as Brits spent less on cars, eating out, holidays and clothes.

In May, the Organisation for Economic Co-operation and Development (OECD) predicted the UK economy will be the hardest hit among the world’s developed countries due to the pandemic.

The latest ONS data shows that Italy’s economy shrank by 5.3 per cent in the same quarter – the country went into lockdown sooner than the UK.

France also fell by 5.3 per cent, while Germany dropped by 2.2 per cent, the USA by 1.3 per cent and Japan by 0.6 per cent.

Jonathan Athow, deputy national statistician at the ONS, said: “Our more detailed picture of the economy in the first quarter showed GDP shrank a little more than first estimated – this is now the largest quarterly fall since 1979.

“Information from government showed health activities declined more than we previously showed.

“All main sectors of the economy shrank significantly in March as the effects of the pandemic hit.

“The sharp fall in consumer spending at the end of March led to a notable increase in households’ savings.”

There are fears millions of Brits could lose their jobs due to the ongoing crisis.

The government’s furlough scheme has helped people and businesses stay afloat throughout lockdown, but Chancellor Rishi Sunak is set to wind it down in October.

From August, employers will have to start paying towards the scheme.

Meanwhile, the number of people on unemployment benefits has risen by 2.1million.

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