LONDON • Britain’s economy shrank by a quarter in March and April as entire sectors were shuttered by the coronavirus lockdown, reaching what looks likely to be the bottom of a “catastrophic” crash before a long and slow recovery.
A 20.4 per cent month-on-month contraction in April coupled with a 5.8 per cent drop in March effectively wiped out almost 18 years of growth in two months, returning the economy to the same size it was in 2002, according to the Office for National Statistics.
While a rebound is likely as more businesses start to reopen, the grim figures show the scale of the challenge facing policymakers.
The hit to the economy also comes at a delicate time for Prime Minister Boris Johnson, who faced mounting criticism this week by politicians and scientific advisers who publicly blamed his Conservative administration for making a series of grave mistakes since the beginning of the outbreak.
“This is catastrophic, literally on a scale never seen before in history,” said Mr Paul Johnson, director of the Institute for Fiscal Studies think-tank. “The real issue is what happens next.”
The Organisation for Economic Cooperation and Development says Britain – with its huge services industries which have been hit hard by social distancing measures – could suffer the worst downturn among the countries that it covers, with an 11.5 per cent contraction this year.
Finance Minister Rishi Sunak said the £133 billion (S$233.5 billion) of extra spending and tax cuts he has rushed out meant Britain had “the best chance of recovering quickly as the economy reopens”.
Much of Britain’s retail sector is due to open its doors next week and the government last month urged people who could not do their jobs at home to return to work, as lockdown restrictions are gradually lifted.
Bank of England governor Andrew Bailey said on Wednesday he could see some signs of a recovery but that long-term economic damage remained likely.
Mr Johnson said the hit might be short if the roughly one-third of private sector employees who are temporarily laid off can return to work, consumers go out and spend again, and Britain avoids a second wave of Covid-19.
But it was more likely that unemployment jumps as the government’s wage subsidy scheme ends in October, and Britain limps into next year with the risk of a Brexit shock also on the horizon, he said.