Economy  

Economy shrinks 19% over three months of lockdown

Economy shrinks 19% over three months of lockdown

The UK economy shrank by nearly a fifth during lockdown as the government restrictions put in place to curb the coronavirus dramatically reduced economic activity, official data has shown.

Figures from the Office of National Statistics, published this morning (July 14), show gross domestic product fell 19.1 per cent in the three months to May — a record decline.

The economy returned to growth in May with a 1.8 per cent rise, but it was not enough to counter the 6.9 per cent drop in March and April’s record 20.4 per cent contraction.

Jonathan Athow, deputy national statistician for economic statistics, said: “Manufacturing and house building showed signs of recovery as some businesses saw staff return to work. 

“Despite this, the economy was still a quarter smaller in May than in February, before the full effects of the pandemic struck.”

Accommodation and food services was the worst hit sector over the three months, shrinking 72 per cent, while only the public administration and defence sub-group saw any signs of growth at 0.2 per cent.

Mr Athow said although there were some areas which saw some pickup, such as retail with record online sales, most other services “remained in the doldrums”.

In the three months to May, production fell by 15.5 per cent, services by 18.9 per cent and construction by 29.8 per cent.

Tom Stevenson, investment director at Fidelity International, said today’s figures meant hopes for a v-shaped recovery were “fading fast”.

He said: “We’re still a very long way from understanding the shape of [the economy]’s return to normal...and I suspect we’re looking at something resembling far more of a ‘W’ — a series of improvements and relapses, before a proper recovery takes hold.”

The UK's blue chip index has dropped 1 per cent since opening this morning while the FTSE 250, which is more exposed to the UK economy, has fallen 1.4 per cent.

Robert Alster, head of investment services at Close Brothers AM, agreed, branding the figures “undoubtedly worrying”.

“For the economy to only grow by 1.8 per cent in May, the month where lockdown started to ease, points to choppy waters ahead”, Mr Alster said.

He added the next few months would be “crucial” in giving us more of an indication towards the long-term damage that Covid-19 has done to the UK economy.

imogen.tew@ft.com

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