UK economy shrinks by fastest pace since 2008 financial crisis

Wednesday, 13th May 2020 11:40

The UK economy contracted by 2% - its fastest pace since the financial crisis - in the first three months of the year, as Covid-19 took hold. This followed a zero-growth figure from the final quarter of 2019.

This is the first official growth estimate since the UK entered lockdown on 23rd March.

Ruth Gregory, senior UK economist at Capital Economics said that the figures showed that the UK was “already in freefall within two weeks of lockdown going into effect”.  Widespread declines were felt most acutely in the manufacturing, services, and construction sectors.

However, economists had forecast that the contraction would be 2.6% for the first three months of the year so the fall has not been as sharp as predicted. France and Italy experienced much bigger contractions with 5.8 % and 4.7% respectively. Our figures for the coming quarter are expected to be in this region.

Today, the UK enters its second phase of lockdown where we see those sectors that can return to work, do so – albeit safely. This includes food production, construction, and manufacturing. Today will also see the housing market return to work, with estate agents, removals and conveyancers restarting operations.

Although there have been many comparisons with the 2008 financial crisis following the collapse of Lehman Brothers, experts are forecasting that the UK will bounce back quickly; whilst the UK economy is set to shrink by 14% in 2020, we will see a growth of 15% in 2021. Another positive to hang on to is that the downturn we will experience will be less prolonged with an estimate of 2 years compared to the five-year downturn from 2008.

Subscribe