UK in largest recession on record as economy contracts 20.4%, Latest World News - The New Paper

UK in largest recession on record as economy contracts 20.4%

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LONDON: Britain's economy contracted by a record 20.4 per cent in the second quarter with the country in lockdown over the coronavirus pandemic, official data showed yesterday.

"It is clear that the UK is in the largest recession on record," the Office for National Statistics (ONS) said.

It is the most severe contraction reported by any major economy so far, with a wave of job losses set to hit later this year.

The scale of the economic hit may also revive questions about Prime Minister Boris Johnson's handling of the pandemic, with Britain suffering the highest death toll in Europe.

More than 50,000 UK deaths have been linked to the disease.

"Today's figures confirm that hard times are here," Finance Minister Rishi Sunak said.

"Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will."

ONS data released on Monday showed that around 730,000 workers have been removed from the payrolls of British companies since March. Announcements of job cuts have become a daily occurrence, with companies expected to pick up the pace of layoffs as the government's key employment support scheme ends in October.

The Bank of England expects the unemployment rate to shoot higher to around 7.5 per cent by the end of the year from 3.9 per cent currently.

Growth restarted in May and quickened in June, when the economy expanded by a monthly 8.7 per cent - a record single-month increase and slightly stronger than forecasts by economists in a Reuters poll.

However, some analysts said the bounce-back was unlikely to be sustained.

Last week the Bank of England forecast it would take until the final quarter of next year for the economy to regain its previous size.

Any decision to pump more stimulus into the economy by the BoE and Mr Sunak will hinge on the pace of growth in the coming months, and whether the worst-hit sectors such as face-to-face retail and business travel ever fully recover.

The second-quarter GDP slump exceeded the 12.1 per cent drop in the euro zone and the 9.5 per cent fall in the US. - AFP, REUTERS