The economy shrank by a fifth during the pandemic; “one of the worst recessions the UK has ever experienced.”
It was announced this morning that the country is officially in recession…again.
It must come as no surprise to anyone that the UK’s economy has suffered because of lockdown restrictions arising from the coronavirus global pandemic. Given that no one could leave their homes without very good reason, all leisure activities, gigs, events and visits to places of interest ceased overnight.
Yes, we had the internet, which meant people could still buy stuff; however, with such a huge threat to our health hanging over us, it didn’t put us in the mood to buy the latest fashions, new cars or bags of bling, funnily enough.
It wasn’t just a lack of spending, some companies were forced to shut their doors in March. Workers in manufacturing and construction couldn’t exactly take their work home, which meant these industries stopped completely until recently.
Figures have now been released that show the economy shrank by 20.4% during April and May - the peak of lockdown. Add this to the news that 750,000 people have lost their jobs because of Covid-19, and that a further million workers are expected to join them in the dole queue by the time the furlough scheme fully ends, it could be argued that there will be a lot less money around to spend on anything.
Even with 'Eat Out To Help Out', many businesses are going under
The last official recession was in 2007/8, when global banks ran out of funds, due to a plethora of poor lending decisions. Officially, this recession only lasted eighteen months and ended in 2009; however, the general public might argue that point with economists, as it certainly felt like it lasted much longer in practice, compared with a stack of numbers in government ledgers. Some cities, predominantly in the North, only got back on their feet a couple of years ago.
If this all sounds like more bad news to cope with on top of the pandemic, June’s figures actually surprised economists. During this month, GDP bounced back 8.7% as people began to venture out of their homes, spending money as they did so.
July 4 (a date so clearly associated with ‘independence’ surely wasn’t lost on coronavirus strategists) was the official line in the sand, the time when the government allowed us to come out of hibernation. From this date, pubs and restaurants could reopen, hairdressers could work again, and beaches could be visited once more – as long as we adhered to social distancing rules. Though it wasn’t ‘back to normal’, it felt amazing to be enjoying aspects of life again after staring at the same four walls for months. If June recorded a rise in spending, it’s perhaps a no-brainer to assume that official figures, when they’re released, will show the economy grew further still during July.
The ‘Eat Out to Help Out’ scheme currently running through the month of August may bring even more good news on the country’s financial front. Already, financial experts are saying that this recession and the consequential shrinking of the economy has not proved to be as bad as they’d predicted at the outset of lockdown.
According to the same experts, the severity of any recession is not measured by its depth, i.e. how much the economy actually shrinks, but by how long it lasts. If future months continue to show increased spending, it may not be long before the economy is back to where it started. Considering that the virus will be with us for a long time yet, and also that further lockdowns may continue to occur on a local level, this will at least help the UK cope financially with the fallout of Covid-19.
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