UK GDP drops record 20.4%
12 Jun 2020
The UK recorded its biggest ever fall in GPD in April, the first full month of business activity to be impacted by coronavirus, according to data from the Office for National Statistics (ONS) which shows a 20.4% drop
12 Jun 2020
The ONS said the monthly decline in GDP in April 2020 was equivalent to a fall of approximately £30bn. This is three times greater than the fall experienced during the 2008 to 2009 economic downturn.
During the global financial crisis, from the peak in February 2008 to the lowest point of March 2009, a total of 13 months, GDP contracted 6.9%.
Jonathan Athow, deputy national statistician for economic statistics, said: ‘April’s fall in GDP is the biggest the UK has ever seen, more than three times larger than last month and almost ten times larger than the steepest pre-Covid-19 fall. In April the economy was around 25% smaller than in February.
‘Virtually all areas of the economy were hit, with pubs, education, health and car sales all giving the biggest contributions to this historic fall.
‘Manufacturing and construction also saw significant falls, with manufacture of cars and housebuilding particularly badly affected.
‘The UK’s trade with the rest of the world was also badly affected by the pandemic, with large falls in both the import and export of cars, fuels, works of art and clothing.’
The decline was more than triple the previous record fall of 5.8% in March, when the lockdown was imposed late in the month.
Widespread factory and business closures saw the percentage of businesses in the production industries who reported zero turnover jump to just under 12%, compared with just over 2.5% in the same month the previous year. Those in the construction industry reporting zero turnover shot up to over 40%.
Air transport recorded a 92.8% drop in activity, travel agencies were down 89% and food and beverage services industries 88%.
Jonathan Gillham, PwC's chief economist, said: ‘A 20.4% decline in GDP is clearly unprecedented, but not unexpected.
‘The economy is now roughly 26% smaller than it was in July last year.
‘Breaking down the 20.4% reduction in GDP, the decline in retail sales accounts for around 15% of this figure, with accommodation and restaurants contributing around 9% and construction 12%.
‘The shutdown in car plants led this industry to nearly halve in size and new engine production is below 1% of what it was pre-lockdown. Perhaps unsurprisingly, the pharmaceutical industry was the only non-government sector to show growth (15.4%).’
There have also been substantial reductions in international trade - goods exports were down by £26bn (26.5%) in three months to April 2020 compared with three months to January 2020 and the trade deficit increased by £4.5bn to £19.3bn.
Gillham said: ‘This data underlines that the effectiveness of the response from both the government and the business community remains critical to limiting the longer term scarring to the economy through business failures and unemployment.
‘If this response is effective, we would expect a quicker economic recovery than we saw after the financial crisis, even though the short-term fall in output will be much steeper due to the lockdown.’