CHANCELLOR Rishi Sunak has warned “hard times are here” as the UK economy enters into the “worst ever” recession.
The economy shrunk by a record 20.4 per cent in just three months.
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It’s the first time in 11 years that the UK has tipped into a recession.
Economists consider two consecutive three-month periods where GDP falls as the technical definition of a recession.
The latest GDP figures released by the Office for National Statistics (ONS) this morning showed that GDP fell by 20.4 per cent between April to June.
It follows a drop of 2.2 per cent between January to March.
Chancellor Rishi Sunak said: “I’ve said before that hard times were ahead, and today’s figures confirm that hard times are here.”
He added: “Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will.
“But while there are difficult choices to be made ahead, we will get through this, and I can assure people that nobody will be left without hope or opportunity.”
GDP plunged as Brits spent less money when shops were forced to close due to the coronavirus crisis, while factory and construction output also fell.
Largest recession on record – but not all doom and gloom
But monthly figures showed the economy bounced back by a slightly better-than-expected 8.7 per cent in June, following growth of 2.4 per cent in May, as lockdown restrictions eased.
The ONS said the economy is still a long way off from recovering the record falls seen in March and April after tumbling into “the largest recession on record”.
The UK economy was last in a recession in 2008/2009 following the financial crash.
The Bank of England forecast the economy would not jump back to pre-virus levels until the end of 2021.
How to recession proof your finances
IF you’re worried about the recession hitting your finances then we explain how to protect yourself.
CHECK YOUR FINANCES Take a look at where you can cut costs. Are there any subscriptions you could cancel? Could you haggle down a bill? Reassess your finances and work out where to save cash and then save this money into a rainy day fund.
PAY OFF YOUR DEBTS Make sure you’re repaying priority debts and if you’re struggling speak to your lender. Use a tool such as MoneySavingExpert.com’s eligibility checkers to check which cards and loans you’re likely to be accepted for without it hurting your credit score. You can get FREE debt advice from places like Citizens Advice and StepChange.
DIVERSIFY YOUR PENSIONS AND INVESTMENTS If you’ve got a pension or investments make sure your pots are well diversified. Being overexposed to one asset class or one particular company could put your savings at risk if something goes wrong.
The GDP figures come as UK unemployment have risen by 730,000 workers since March after another 114,000 Brits lost their jobs last month.
Around 220,000 workers lost their jobs in the quarter between April and June, which is the largest quarterly drop since 2009.
As unemployment figure surges, we round up 20,000 jobs you can apply for today.
The UK economy performed better than Spain’s, which dived 22.7 per cent over the same period, but the decline was around twice the size of the 10.1 per cent drop in Germany.
Jonathan Athow, deputy national statistician at the ONS, said: “The recession brought on by the coronavirus pandemic has led to the biggest fall in quarterly GDP on record.
“The economy began to bounce back in June with shops reopening, factories beginning to ramp up production and housebuilding continuing to recover.
“Despite this, GDP in June still remains a sixth below its level in February, before the virus struck.
“Overall, productivity saw its largest-ever fall in the second quarter.”
He added: “We always knew that this was going to be a very tough time. We want to see a return to economic vitality and health.”
‘The recovery is in the government’s hands’
TRACEY Boles, business editor of The Sun, shares her views on today’s GDP figures.
You could say that the real economic news today is not that the UK fell into a historic recession in the second quarter. That we could see coming.
Instead, it is that the recovery that began in May accelerated in June as the lockdown was eased further.
In June, the economy grew by 8.7 per cent, the Office for National Statistics said yesterday. This rebound was driven by construction, retail and hospitality.
June’s encouraging rise is but a small step on the road to recovery, however.
The Bank of England has already warned that it could take until the end of 2021 before the economy returns to 2019 levels.
So what would help to fire up the recovery?
The Federation of Small Businesses is calling for the “most pro-business Budget ever”.
A cut to employer national insurance contributions, ambitious investment in our infrastructure – not least broadband – networks, and business rates reforms are all on its “essentials” list.
Leading business group the BCC, which represents firms of all sizes, says “bold action” is required from the Government. It also wants a cut in national insurance contributions.
According to the Institute of Economic Affairs, the key to a strong recovery will be the continued lifting of the lockdown – particularly the reopening of schools – and the return of consumer and business confidence.
That requires clear and consistent messaging from the government.
So Boris, over to you.
Derrick Dunne, chief executive of Beaufort Investment, said: “Despite bringing us into an official recession, it’s not all doom and gloom.
“The ONS reported a 8.7 per cent uptick for June, just a week after the Bank of England told us the overall hit for 2020 would not be as steep as initially feared.
“While things may be moving in the right direction – albeit slowly – it’s important to remember that recovery will not be the same for every industry.
“Schemes like Eat out to Help Out will no doubt provide some welcome relief for restaurant bosses, but the government will need to think carefully about how to support other sectors such as travel, which will continue to struggle without intervention.”
How will the recession affect your finances?
During a recession there is a rise in unemployment.
It has been predicted that unemployment could treble to 3million this year.
Employees may also find it harder to get promotions or pay rises.
While those graduating from university or leaving school may find it harder to get a first job.
You may find it harder to get credit, and banks have already started cutting deals on the top credit cards.
Some banks have also turned down furloughed workers for mortgages.
It is expected that we will see a rise in personal insolvencies and home repossessions too. Although the FCA has banned the repossession of homes until October 31.
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The International Monetary Fund (IMF) has predicted that the recession will be over next year and the world economy will start bouncing back.
Although, experts have warned that the strength of recovery in the UK will depend on how much unemployment rises.
It’ll also depend on whether there is a second coronavirus wave with renewed restrictions.
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