Coronavirus lockdown pushes UK into biggest economic slowdown on record as global recession looms
THE UK economy is set to shrink at an unprecedented rate after business activity this month dived at the fastest pace on record.
It follows the widespread shutdown of non-essential businesses caused by the coronavirus pandemic.
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According to market research firm IHS Markit, which monitors manufacturing and services companies, 81 per cent of services companies reported a fall in business during the fortnight from April 7 to April 21
That's the largest drop for services companies since IHS Markit began compiling the data in 1996.
Meanwhile, 75 per cent of manufacturing firms saw a decline in business over the same period.
Activity for both sectors sank at a rate which exceeded the downturn seen at the height of the global financial crisis in 2008 "by a wide margin", the survey said.
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Overall, IHS Markit's CIPS Flash UK composite purchasing managers' index tracking manufacturing and services fell to 12.9 in April, down from 36 last month.
Chris Williamson, chief business economist at IHS Markit, said: "Business closures and social distancing measures have caused business activity to collapse at a rate vastly exceeding that seen even during the global financial crisis.
"This confirms fears that GDP will slump to a degree previously thought unimaginable in the second quarter due to measures taken to contain the spread of the virus."
The slump indicates the reading is consistent "with GDP falling at a quarterly rate of approximately 7 per cent," according to Mr Williamson.
But he warned the actual decline in GDP "could be even greater", in part because the index excludes the vast majority of the self-employed and the retail sector, which have been especially hard-hit by the covid-19 containment measures.
The Office for Budget Responsibility has predicted a second quarter hit to the UK's GDP (gross domestic output) of 35 per cent, while the unemployment rate could double to around 10 per cent.
A global recession could also be on the not too distant horizon with the International Monetary Fund (IMF) chief warning "it has already begun".
Bank of England boss, Andrew Bailey, has also warned banks to speed up loans for struggling companies saying the support would speed up recovery and prevent long term damage to the economy.
Just two in ten (21 per cent) of those who've applied have been given funding, according to the latest figures from trade body UK Finance.
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Duncan Brock, group director at professional body CIPS (Chartered Institute of Procurement & Supply), said: "Though this significant and further deterioration from last month's results came as no great surprise, it is no less devastating.
"The overall services fall in output was faster than manufacturing and the steepest since records began in 1996."
But James Smith, developed market economist at think tank ING economics, added: "There's little doubt these are shocking figures, but the reality is they don't tell us an awful lot that we didn't already know."
The Sun says
DAY by day our economy is being destroyed. The new forecasts are cataclysmically worse than anything yet predicted.
Despite the best efforts of Chancellor Rishi Sunak and his bailouts, the collapse in our growth and the scale of job losses are starting to look apocalyptic.
Previous talk of a speedy recovery once the lockdown lifts has been worryingly complacent. For many it will come too late. The damage will be permanent.
One top economist says it “has pushed the economy into a recession of unprecedented speed and depth”. Another says business activity has collapsed “at a rate vastly exceeding the global financial crisis, confirming fears that GDP will slump to a degree thought unimaginable”.
Remember where Britain was three months ago before Covid blindsided us. We were a powerhouse with minimal unemployment, jobs at historic highs, inflation low and pay rising healthily.
We are now in deep trouble, like never before, if we cannot get back to work.
The Sun still backs the lockdown, while there remain so many deaths and the risk of a second, bigger wave of infections which could yet overwhelm the NHS.
But it is vital the Government, despite its admirable determination to save lives, maintains focus on the immense harm being done to the country’s future. It needs an urgent strategy to mitigate that, alongside one to emerge from the lockdown as fast and safely as possible.
Neither HS2, at £106billion, or our £14billion foreign aid budget can surely now be sustainable. Tax cuts look crucial to fuel a spending and jobs revival.
Meanwhile the public, admirably doing its bit by staying home, must also be alive to this economic meltdown.
We must follow the social-distancing rules and wear masks where needed.
But we should also be clamouring to get back to our jobs before they cease to exist.