The UK economy shrank by a record 20 per cent in April, official figures show, as the country sat in lockdown to curb the spread of the coronavirus.
Figures from the Office for National Statistics reveal that UK GDP fell by 20.4 per cent in April. This came after a decline of 5.8 per cent in March, caused by just one week of lockdown.
Monthly GDP index, Jan 1997 until Apr 2020
Source: Office for National Statistics
March’s fall is the largest on record. It means that the UK economy shrank by 10.4 per cent in the three months to the end of April.
The services sector fell by 9.9 per cent in the three months to April while production contracted by 9.5 per cent. The construction sector’s output crashed 18.2 per cent over the same period.
The ONS pointed out that April experienced sharper falls than March after the negative impacts of a full month of social distancing and lockdown led to a massive fall in consumer demand and business and factory closures, as well as supply chain disruptions.
Jonathan Athow, deputy national statistician for economic statistics at the ONS, said: “April’s fall in GDP is the biggest the UK has ever seen, more than 3xlarger than last month and almost 10x larger than the steepest pre-Covid-19 fall. In April the economy was around 25 per cent smaller than in February.”
UK GDP growth, Q1 (Jan to Mar) 2005 until Feb to Apr 2020
Source: Office for National Statistics
Athow added: “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.”
Breakdown of GDP and its sub-sectors, rolling three-month growth rates and contributions to growth, Feb to Apr 2020
Source: Office for National Statistics
Neil Birrell, chief investment officer at Premier Miton Investors, said all of the UK’s economic data for April showed the economy was “in awful shape”.
“But April was a long time ago, when lockdown was having the greatest effect,” he added.
“Other countries’ data is improving as lockdown eases and the concern is that the UK is getting left behind and, as we are currently witnessing, equity markets are very sensitive to any threat to recovery.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, noted that April’s 20.4 per cent decline was worse than the consensus estimate of 18.7 per cent.
“The economy will take a long time to recover from the pummelling inflicted by the Covid-19 pandemic. April’s unprecedented drop in GDP extends the decline from January's peak to a gargantuan 25.2 per cent,” he said.
“April surely represents the low point for GDP this year. The government’s recommendation on 13 May that all employees unable to work from home should return to their usual place of work has kick-started a tentative recovery in the industrial and construction sectors. A variety of unconventional indicators of economic activity — such as energy consumption, online search data and vehicle miles — suggest economic activity is recovering, while surveys of retail sales improved greatly in May.”
However, Tombs pointed out that these economic indicators have rebounded less than many other European countries have as lockdown rules are keeping most consumer services businesses “dormant” while the limited reopening of schools will stop many parents returning to work.
In addition, falls in employment and investment, along with a persistent rise in saving by households, will likely ensure the UK economy “remains a shadow of its former self later this year”, even if most of the remaining restrictions are removed.
“GDP has slumped to a much greater extent than in previous recessions. GDP typically takes three-to-four years to return to its pre-recession peak,” Tombs finished. “The way back will be much slower than the descent.”