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20.4% plunge in output

Sectors may need ‘open-ended’ support as GDP slumps


Construction was among the hardest hit sectors (pic: Terry Murden)

A business group said today that some sectors will require ‘open-ended support’ for some time as a 20.4% crash in GDP spelled out the scale of the recovery task facing the government.

The data for April – the worst-ever monthly figure – confirmed the severe battering expected from the coronavirus pandemic after the economy was almost completely shutdown. City economists had forecast an 18.4% decline.

British Chambers of Commerce head of economics Suren Thiru said that with impact being felt across many sectors the prospect of a V-shaped recovery now looked unlikely.

The London stock market plunged on opening, but later recovered, and the FTSE 100 was more than 80 points higher in mid-morning trade.

The April GDP figure follows a 5.8% fall in March. Construction, hospitality, manufacturing, retail and travel were among the hardest hit sectors.

Industrial output fell 20.3%, the largest monthly fall since records began in 1968. Services output was down 19% and construction output plummeted 40.1% – all worse than expected. Within industrial output, manufacturing plunged 24.3%.

The public administration and defence sector was flat, while financial and insurance activities only fell 5.3%.

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The UK economy shrank by 10.4% in the three months to April, the ONS’s rolling three-month estimate showed.

ONS statistician Jonathan Athow said the April figure was almost ten times larger than the steepest pre-covid-19 fall. In April the economy was around 25% smaller than in February.

He added: “Virtually all areas of the economy were hit, with pubs, education, health and car sales all giving the biggest contributions to this historic fall.

“The UK’s trade with the rest of the world was also badly affected by the pandemic, with large falls in both the import and export of cars, fuels, works of art and clothing.”

British Chambers of Commerce head of economics Suren Thiru said: “With a monthly fall in UK GDP over thirty times the average month on month decline during the global financial crisis, the economic impact of Coronavirus has been put into sharp relief. 

“With lockdown restrictions gradually easing and shops beginning to reopen, April is likely to prove to be the low point for the UK economy.

“However, any prospect of a ‘V-shaped’ recovery remains unlikely, with many sectors continuing to operate at reduced capacity.

“Some firms, including those in our hospitality, leisure and tourism industries, may remain closed for some time and will require flexible and open-ended government support to weather the economic storm. 

“Over the coming months, further action will be needed to limit the long-term economic damage and kickstart a recovery, including close gaps in government support and providing incentives to help stimulate consumer demand and business investment.

“Establishing air bridges between countries with low infection rates would provide a much-needed boost to key parts of the UK economy.”

Azad Zangana, senior European economist & -trategist at Schroders, said that April should prove to be the worst month for the economy during the coronavirus crisis. On 10 May, prime minister Boris Johnston asked non-essential workers who cannot work from home, but that can safely return to work, to do so. 

“Google mobility data suggests that the fall in travel to work bottomed out in April, which supports our view that GDP in May could have returned to positive growth. 

“Of course, it will take a very long time before activity returns to its previous peak, but as the UK tentatively takes further steps to re-open the economy, we expect the economic recovery to gather momentum.”

Both the Job Retention Scheme and financing support programmes should remain agile and responsive

– Alpesh Paleja, CBI

Alpesh Paleja, CBI lead economist, said:  “This data confirms what we already knew – that the economy was hit hard as it entered lockdown. Our business surveys suggest that activity hasn’t fared much better since. 

“The government has listened to business’ needs, and reflected them well in the schemes currently in place. Going forward, both the Job Retention Scheme and financing support programmes should remain agile and responsive to the evolving economic situation.

“This will leave us well-placed to build an ambitious vision for our economic recovery, one that prioritises jobs, investment and tackling pre-crisis inequalities across our society.”

Scottish Secretary Alister Jack urged First Minister Nicola Sturgeon to move more quickly in reopening the economy.

But Ms Sturgeon said in her daily briefing: “While I understand the desire for speed of the recovery, the sustainability of the recovery really matters.”

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