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UK Economy Suffers Sharpest Decline on Record

By Jon Munnery
13 August 2020

The UK economy suffered the sharpest decline in output ever recorded during the second quarter of the year as the coronavirus crisis took a devastating toll.

GDP fell by as much as 20.4 per cent between April and June, with the country having gone into lockdown to limit the spread of coronavirus from late March.

Businesses across a great swathe of the economy were prevented from operating as normal and output suffered in short order to an extent never witnessed before in modern times.

In better news, there were upturns recorded in May and June, with GDP having increased by 1.8 per cent and 8.7 per cent respectively in those months.

However, the overall scale of economic activity happening across the UK at the end of June was still roughly a sixth down on where it was in February and the beginning of what’s turned out to be a tumultuous 2020.

The enormous slump in output seen in the second quarter of the year follows a decline of 2.2 per cent recorded for the first quarter, which means the UK is now officially in a recession.

A variety of emergency measures and mechanisms were introduced by the government to support businesses in the early phases of the pandemic and the lockdown but many of them are now set to be scaled back and ended.

There are concerns that the rolling back of state support initiatives will have the effect of pushing thousands of companies out of business and others to the position of needing to make stark choices about redundancies.

Alpesh Paleja from the Confederation of British Industry (CBI) has described what happened to the economy in the second quarter of the year as an “economic pummelling” and warned that a second wave of coronavirus could have further damaging effects on GDP in the coming quarters.

“With people’s movement restricted over the second quarter, it’s unsurprising that sectors like hospitality, arts and entertainment have felt the full brunt of lockdown,” Paleja said.

“Cashflow constraints are still biting hard for businesses, and with the pandemic not going away anytime soon, a sustained recovery is by no means assured,” he added.

Jonathan Munnery
Insolvency & Restructuring Expert
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