The UK has crashed into a "deep recession" after Covid-19 lockdown measures caused the economy to suffer its worst quarterly fall since records began.
According to data from the Office for National Statistics, published today (August 12), gross domestic product saw a record fall of 20.4 per cent from April to June, compared with the first three months of the year.
This came as business activity and consumer demand plummeted as the UK was forced into lockdown to curb the coronavirus.
It meant the UK economy entered its first technical recession, which is considered as two straight quarters of economic decline, since 2009.
However, the data showed the economy started to bounce back in June as the government began easing lockdown restrictions and businesses resumed trading, although some services sectors continue to be “severely affected” as many businesses remain closed.
According to the ONS the hospitality industry was hit the hardest of all.
Hinesh Patel, portfolio manager at Quilter Investors, said: “Economic output remains at a fraction of what it was in February, and as such it is clear further stimulus is going to be required.
“The UK relies so heavily on the services sector and consumer consumption. With the government potentially coming to the maximum limits of reopening that is possible and favouring localised lockdowns in the future to prevent further economic reckonings, they need to get people consuming as much as they can. However, the fact of the matter is that many industries still going to struggle through the recovery.”
Service industries, which power four fifths of the economy, still remain 17.6 per cent below the level of February 2020, growing by 7.7 per cent in June.
Meanwhile, the production industries remained 11.6 per cent below their February 2020 level, even after growth of 9.3 per cent last month, with manufacturing declining by 14.2 per cent since February and growing by 11 per cent since May 2020.
The ONS said despite businesses reporting that they had begun trading again in June, there was still a higher than usual number of businesses which were reporting no turnover.
The economy was already shrinking before April. March saw GDP fall nearly 6 per cent as the lockdown measures were first put in place, while overall the economy shrank 2 per cent in Q1.
Tom Stevenson, investment director at Fidelity International said: “Expectations from the Bank of England that the economic fallout from the pandemic would be short-lived, or V-shaped, are borne out by the sharp fall and rapid partial recovery but UK GDP has seen the biggest quarterly drop of any G7 economy.
“No-one knows exactly what the recovery from coronavirus will look like - particularly with the potential for a second wave of infections and further local lockdowns - but it is likely that it will be a slow crawl towards pre-Covid levels with further government stimulus needed to restore sustained growth.
“There are some encouraging signs. Household consumption and the housing market are already heading back to pre-pandemic levels.