Chancellor Rishi Sunak has said that it is “very likely” that the UK will experience a “significant recession” as a result of the coronavirus crisis.
He told the BBC, “A recession is technically defined as two quarters of the GDP decline.
“We have seen one here with only a few days of impact from the virus, so it is now very likely that the UK economy will experience a significant recession this year and we are now in the middle of it.”
The UK economy contracted by 2% in the first quarter of 2020, when the coronavirus crisis saw activity shrink at a record pace in March, official figures show.
The Office for National Statistics (ONS) said that activity plunged by 5.8% in March, causing gross domestic product (GDP) to plummet in the first quarter during the biggest decline since late 2008 at the peak of the financial crisis.
The most recent figures show the first direct effect of the Covid-19 pandemic on the UK economy after the country was imprisoned to control the spread of the virus.
But with the blockade only coming into effect on March 23, the second quarter will put full pressure on the economy after the UK comes to a halt.
Jonathan Athow, deputy national statistician for economic statistics at the US, said: “The pandemic hit nearly every aspect of the economy in March, dragging growth to a record decline each month.
“The services and construction sectors fell a record month, with education, car sales and restaurants all dropping significantly.”
He added, “The pandemic also hit global trade, with UK imports and exports falling in recent months, including a notable drop in imports from China.”
The March decline is the worst since records began in 1997, while the first quarter decline is the worst since the UK economy shrank 2.1% in the recession following the financial crisis between October and December 2008 .
It is also comparable to zero growth in the last three months of 2019.
But the US warned that there was more uncertainty than usual about its first GDP estimate, given the challenges of collecting economic data during the lockdown.
And there will be much worse pain, with the Bank of England last week warning that the corona virus would see the economy drop by another 25% in the second quarter and drop by 14% in 2020 – the worst annual decline since its inception of the records.
The Bank also said the UK unemployment rate could hit 9% between April and June as businesses across the economy are hit by lockdown.
The Resolution Foundation’s think tank warned that the decline in the first quarter was an “ominous sign of the future.”
James Smith, research director at the think tank, said, “The cut was only seven business days during the first three months of the year.
“But it was still enough to deliver the biggest quarterly economic contraction since the peak of the financial crisis and the weakest one-month change ever.
“With the country completely or partially shut down well into the second half of the year, the grim economic milestones reached in the latest data will be shattered next time.”
The ONS figures showed that all sectors were hammered in the first quarter, with a 1.9% decline in services output, which is the largest quarterly decline ever.
Production output also declined by 2.1% in the first quarter, driven by declines in production, while construction output fell by 2.6%.