The UK faces a "significant recession", Chancellor of the Exchequer Rishi Sunak has warned after figures showed the country's economy shrank by 2 per cent in the first three months of the year due to the impact of the coronavirus-induced economic lockdown.
The UK’s Indian-origin finance minister, who is at the forefront of the economic response to the coronavirus pandemic and has spearheaded as wide range of measures to protect jobs, said that while the country was yet to fulfil the technical definition of a recession – two successive quarters of falling activity – it was only a matter of time.
“The first quarter was that bad based on just a few days of the impact of coronavirus in March. It is very likely that the UK is facing a significant recession at the moment and this year,” Sunak told ‘Sky News’. “It’s premature to speculate about that far in the future. We are living in a time of unprecedented economic uncertainty. What we are thinking about foremost at the moment is protecting people’s health,” he said.
His warning came as the UK’s Office for National Statistics (ONS) released data on Wednesday to show that the hit to the economy in late March had affected almost every sector of the economy. This meant that output had dropped by almost as much in a single month as in the 18-month decline during and after the financial crisis of 2008-09. With people ordered to stay at home from late March, all three main components of growth – services, production and construction – were affected.
"The impacts of the coronavirus were seen right across the economy, with nearly all sub-sectors falling in the three months to March," the ONS said. The figures were the first official look at the lockdown's financial effects and show a contraction of 5.8 per cent in March gross domestic product (GDP) alone – the biggest monthly fall on record. The Confederation of British Industry's chief economist, Rain Newton-Smith, said: "Ultimately, keeping health at the heart of a recovery plan will be key to sustaining an economic revival."
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