UK economy shrinks at record pace as Covid-19 takes toll
The UK economy shrank at a record pace in March in an early sign of the deep recession that will hit jobs and living standards, official figures showed.
Output contracted by 5.8% from the previous month, the steepest contraction on record since monthly records began in 1997, the Office for National Statistics said in a first estimate.
The rate of contraction was not as bad as the 8% drop pencilled in by economists but showed activity plunging after the government imposed its lockdown on 23 March. The economy was squeezed more in one month than in the year and a half after the global financial crisis.
All of the private sector shrank in March, led by services such as travel agencies, down 50%, food and accommodation. Construction output fell at by a record 5.9% and manufacturing contracted by 4.6%. Only the government sector expanded – but by just 0.1%.
“With the arrival of the pandemic, nearly every aspect of the economy was hit in March, dragging growth to a record monthly fall," ONS deputy national statistician Jonathan Athow said.
The economy contracted by 2% in the first quarter, a better performance than Spain and France, which both shrank more than 5%. But those countries imposed lockdowns earlier than the UK.
Economists expect still grimmer news for the UK as the shutdown of the economy takes a further toll on growth. The Bank of England has warned the economy could contract by 14% in 2020 and that unemployment could more than double in what would be the deepest recession in modern history.
Ruth Gregory, a UK specialist at Capital Economics, said the ONS figures suggested the economy shrank "a whopping" 21% after the lockdown was imposed. Boris Johnson's government is struggling to find a coherent way to lift the lockdown without allowing deaths from Covid-19 to accelerate.
Gregory said: "March’s GDP figures showed that the UK economy was in freefall as soon as the coronavirus lockdown began. And with all the restrictions in place until mid-May, and then only lifted very slightly, April will be far worse."