New figures from the Office for National Statistics (ONS) have shown that UK GDP fell by more than 20% between April and June. Following on from a drop of 2.2% between January and March, this means that the UK has now officially entered a recession.
The 20.1% drop in quarterly GDP exceeded that of all other G7 nations; France’s GDP fell by 13.8%, followed by Italy at 12.4%, Canada at 12%, Germany at 10.1%, the US at 9.5% and Japan at 7.6%. It is also the steepest recorded contraction since the ONS began collecting data in 1955.
In an interview with Sky News on Wednesday morning, Chancellor Rishi Sunak attributed the contraction to the “composition” of the service-based UK economy, which was heavily affected by the COVID-19 pandemic and resultant lockdown measures.
“Social activities, for example going out for a meal, going to the cinema, shopping, those kinds of things comprise a much larger share of our economy than they do for most of our European comparative countries,” he said.
“So in a situation where you have literally shut down all those industries for almost three months, a long period of time, it is unfortunately going to have an outsized impact on our economy.”
Commercial data and analytics firm Dun & Bradstreet have updated their predictions for the UK economy in 2020 following the new figures’ release. Their updated forecasts now predict a 9.8% drop in real GDP for the year.
“Dun & Bradstreet’s latest proprietary data for Q2 shows that payment performance has deteriorated across all 14 sectors tracked during the pandemic, despite several quarters of continuous improvement prior to lockdown,” wrote the firm’s chief analyst, Markus Kuger. “During the coming quarters, it will be more important than ever for businesses to assess potential credit risk across their existing and future business relationships.”
The basic definition for a recession is a decline in GDP over two consecutive quarters. The UK has not experienced a recession since the 2008-2009 financial crisis, which saw a peak quarterly dip of 2.2% in GDP – just over a tenth of the plunge recorded for Q2 2020.