According to official figures released on Wednesday 12 August, the British economy contracted in the second quarter, compared to the first quarter, by 20.4%. This is the worst result in Europe. It is also the largest quarterly decline in the UK economy since the Office for National Statistics (ONS) began the quarterly listing in 1955.
According to official figures released on Wednesday 12 August, the British economy contracted in the second quarter, compared to the first quarter, by 20.4%. This is the worst result in Europe. It is also the largest quarterly decline in the UK economy since the Office for National Statistics (ONS) began the quarterly listing in 1955.
In the first quarter, Great Britain’s GDP also decreased – 2.2%, which means that the economy is in a so-called technical recession, and the cumulative decline over the two quarters was 22.1%. Only Spain scored worse in Europe.
Services, soft lower abdomen
The UK’s economic performance was weaker than anywhere else due to the length of the lockdown and partly to the fact that the consumer services sector, which has been hit hard by social distancing, has a greater impact on GDP compared to other countries, accounting for 80% of the economy.
The services sector declined 19.9 percent on a quarterly basis, accounting for three-quarters of the decline in GDP.
Mixed signals
April was the worst month, with production down 20% compared to the previous month. In turn, production in June increased 8.7% compared to May, which was a better result than most economists had expected.
Auto sales had a significant impact on the increase in June. GDP rose 11.3% from its lowest level in April, but remained 17.2% below February’s level before the outbreak of the coronavirus crisis.
Since most resort hotels were still closed in June, the recovery in this sector has been slower than others.
Will investors move out of the UK?
Construction production decreased more than industrial production, but increased in June by 23.5% compared to the previous month.
Household spending has fallen sharply, as has government spending due to school closures and non-urgent medical procedures being postponed.
Record-breaking – business investment decreased 31.4% compared to the first quarter. However, British economists hope that delayed household demand in the second half of the year will drive economic growth.
“The real test will come after the summer, when government support programs, such as the leave program that guaranteed job protection, will come to an end,” he believes Nigel Green, Founder and CEO of a large financial consulting firm Devere Group.
He believes that British and global investors will be increasingly concerned about the economic situation in the UK and measures can be expected to hedge against any potential depreciation of UK financial assets by transferring them abroad.
In response to the published statistics, business organizations called on the government to expand wage subsidies under the holiday program and to intensify other forms of assistance to the economy.
