‘Fairly clear’ UK heading for recession as economy takes biggest hit since 2008
The British economy shrank at the fastest pace since the 2008 financial crisis in the first three months of this year, grim new figures show.
In the first official growth estimate to take account of the coronavirus pandemic, the Official for National Statistics (ONS) found that the UK economy contracted by 2 per cent in the first quarter of the year.
That marks the steepest fall since the second quarter of 2008, when the economy shrank by 2.1 per cent at the height of the global financial crisis.
And the quarterly data marks a 1.6 per cent fall on the same time last year.
Two consecutive quarters of negative growth are required before a downturn is officially classed as a recession.
But Transport Secretary Grant Shapps said on Wednesday: “I think it’s fairly clear that since most of the impact will be in the second quarter that we will be [in recession].”
The Cabinet minister told the Today programme: “The most important thing is, as the Office for National Statistics said, all of the support that the Chancellor’s provided, in particular the furlough scheme which he extended yesterday, has made it much better than it would have been without that support because it gives people a realistic chance to stay in their jobs even through this crisis.”
The ONS said the latest release “captures the first direct effects of the coronavirus (COVID-19) pandemic, and the government measures taken to reduce transmission of the virus”.
And it added: “This is the largest quarterly contraction in the UK economy since the 2008 global financial crisis and reflects the imposing of public health restrictions and voluntary social distancing put in place in response to the coronavirus (COVID-19) pandemic.”
The figures also show that household consumption plunged by 1.7 per cent in the first quarter of the year, its largest contraction since the end of 2008, while the services sector took a record 1.9 per cent hit, with “significant contractions” also recorded in production and construction.
The bleak ONS data comes as The Telegraph, citing a leaked Treasury document, reports that Chancellor Rishi Sunak could be forced to hike income tax, end the pensions triple lock and freeze public sector pay to try to meet the multi-billion-pound cost of the coronavirus crisis.
But TUC general secretary Frances O’Grady said: “What's important now is having the right plan for Britain's economic recovery. A plan that keeps us safer than before, and that makes Britain fairer than before for the key workers who have put their lives on the line.
"The Chancellor was right to extend the furlough scheme. The next steps must include a Job Guarantee Scheme to prevent problems with long-term unemployment. And we will need a programme of investment so that we can build back better, with jobs for everyone, fairer work and a greener economy."