Covid-19 slashes GDP by 22% as data shows UK economy is more than a fifth smaller than end of 2019
The UK is in its "largest recession on record", the Office for National Statistics (ONS) has said, after GDP figures released on Wednesday (12 August) showed a record 20.4% contraction in Q2.
The data follows a more modest decline of 2.2% in Q1, leaving the UK economy more than a fifth - 22.1% - smaller than it was at the end of 2019.
The ONS said the fall in GDP reflected "the ongoing public health restrictions and forms of voluntary social distancing that have been put in place in response to the coronavirus (Covid-19) pandemic".
The decline in Q2 was driven, the government department explained, by a 20% fall in output in April, which was the biggest monthly drop on record and reflected widespread declines in output across the services, production and construction industries.
The phased re-opening of many businesses, including non-essential shops and restaurants, through May to June allowed a partial economic bounce, with June's GDP reading seeing an increase of 8.7%.
Portfolio manager at Quilter Investors Hinesh Patel said the figures made it "clear further stimulus is going to be required". With the UK economy relying heavily on the services sector and consumer consumption, the Government must "get people consuming as much as they can".
Patel added: "While the overall picture is shocking, the Bank of England has left itself room to act from a monetary perspective. This shifts eyes onto Rishi Sunak to see if his innovations can be successful. The Eat Out to Help Out scheme appears to have gotten off to a good start, and it is this more targeted stimuli that other industries will be craving. The UK public loves a deal, so this scheme may provide a template for future targeted stimulus. The house builders in particular will be watching it closely, particularly given the proposed relaxation in planning laws."
Co-produced with PFS
72% of people do not want pay for financial advice
Applied to whole of UK
Starts beginning of November