TORY CHANCELLOR SUNAK yesterday said it is ‘very likely’ the UK is in a ‘significant recession’, as figures show the economy contracting at the fastest pace since the financial crisis.
The economy shrank by 2% in the first three months of 2020, as coronavirus forced the country into lockdown.
Sunak said that just ‘a few days of impact from the virus’ in March pushed the economy into decline.
Economists expect a huge slump in the current quarter.
Ruth Gregory, senior UK economist at Capital Economics, said the figures showed the UK economy was ‘already in freefall within two weeks of the lockdown going into effect’.
She added: ‘With the restrictions in place until mid-May and then only lifted very slightly, April will be far worse.’
To put the fall in context, Gregory said that ‘in just one month the economy has tumbled by as much as it did in the year and a half after the global financial crisis’.
That crisis, sparked by over-zealous lending and heavily-indebted businesses and consumers, forced governments to impose austerity measures lasting a decade.
In 2008, the UK bailed out some major banks by taking multi-billion-pound stakes in them. But without access to state support, many companies folded.
Now that the state is giving its full support to the bankrupt bosses the likelihood is that the state itself will be bankrupted.
The lockdown measures announced by Sunak mark a more desperate intervention in the economy, with the state paying the wages of vast swathes of the workforce and guaranteeing loans to businesses.
The Office for National Statistics (ONS) said there had been ‘widespread’ declines across the services, manufacturing and construction sectors.
This includes a record 1.9% fall in services output, which includes retailers, travel agents and hotels.
Household spending shrank at the fastest pace in more than 11 years as restaurants and high street shops remained shut.
The ONS said a rise in spending on food, alcohol and new TVs only partially offset the decline.
On Tuesday, Sunak announced an extension of the furlough scheme subsidising wages to the end of October.
UK bosses and bankers are seeking comfort in the fact that France and Italy saw much bigger contractions of 5.8% and 4.7% respectively in the first quarter.
However, analysts expect a 10% fall in UK gross domestic product (GDP) in the coming quarter.
The Bank of England has warned that the UK economy is likely to suffer its biggest slump on record this year, even if the lockdown is completely lifted by the end of September.
The Bank of England is estimating a 14% economic collapse by the end of 2020.
Trade unions are warning the government that it is treading on the thinnest of thin ice and that the working class will rise up and overthrow it if it atttempts to impose a super austerity.
Meanwhile the top US infectious diseases doctor has warned US senators that the coronavirus will spread further if the country opens up too soon.
Dr Anthony Fauci said yesterday if federal guidelines to reopen were not followed, ‘little spikes’ would become outbreaks.
He also said the real US death toll is probably higher than the official figure of 80,000.
He warned of the risk of triggering a runaway outbreak that officials would not be able to control, adding that such an outbreak would set back economic recovery and lead to ‘suffering and death’.