UK economy shrinks 5.8% in March in the sharpest slump on record

THE UK economy plunged by 5.8 per cent in March in the fastest monthly slump on record. 

The coronavirus lockdown trigged a crash in activity in demand as businesses shut down and Brits were furloughed, according to the Office for National Statistics.

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In the first quarter, UK GDP fell by 2 per cent compared with the previous quarter, its largest fall since the financial crisis.

Speaking to Sky News this morning, the Chancellor Rishi Sunak said: “The first quarter was that bad based on just a few days of the impact of coronavirus in March, so yes it is very likely that the UK is facing a significant recession at the moment and this year.”

The latest figures show the first direct effect of the Covid-19 pandemic on the UK economy after the country was placed in lockdown to control the spread of the virus.

But with the lockdown only coming into place on March 23, the figures only include one full week of lockdown.

The full hit on the economy won't show until the second quarter's results are revealed.

Jonathan Athow, deputy national statistician for economic statistics at the ONS, said: "With the arrival of the pandemic, nearly every aspect of the economy was hit in March, dragging growth to a record monthly fall.

"Services and construction saw record declines on the month with education, car sales and restaurants all falling substantially."

He added: "The pandemic also hit trade globally, with UK imports and exports falling over the last couple of months, including a notable drop in imports from China."

A 2 per cent drop will unbelievably come as sigh of relief for some experts, who predicted that a three month lockdown could caused a 35 per cent fall to GDP.

Speaking on Sky News this morning, Transport Minister Grant Shapps warned that there would be "more [economic turmoil] to come".

"But the important thing is all the measures that the Chancellor Rishi's been taking have at least ensured that some protection has been brought about," he added.

Yesterday, Mr Sunak announced that the Government will be extending the furlough scheme until October, to support employees who can't work during the pandemic lockdown.

It comes as former Chancellor Norman Lamont warned that the public is unaware of the "horrible" economic damage that is "coming round the corner" thanks to the scheme.

The former Bank of England rate-setter Ian McCafferty has also warned that households and businesses face the grim prospect of tax hikes and austerity to cut Britain's ballooning public deficit once the crisis is over.

He said that tax-payers could spend the next two decades paying for the action taken to save the economy now.

But Bank of England boss Andrew Bailey reckons that the UK will exit the economic slump "much more rapidly than the pull back from the global financial crisis".

Ulas Akincilar, head of trading at the online trading platform, INFINOX, said: " 2 per cent decline over three months caused gnashing of teeth when it last happened in the dark days of 2008 – but right now it feels almost like a win.

"The reality is Britain’s economic pain is just beginning, and this anachronistic data only captures the first twinges.

"Nevertheless the markets have become increasingly immune to such dire economic news, and for now their focus remains on the slivers of hope offered by the UK’s partial easing of its lockdown, which begins today."

But Adrian Lowcock, head of personal finance at investment platform, Willis Owen warns that the "worse is still to come".

He added: "While investors should expect the economic data to get worse in the coming months, the policy response has been so immense that there still hope the economy can recover swiftly.

"Much depends on the progress of easing the lockdown whilst containing the virus."

On Monday, the Government revealed its three-step roadmap to open up the UK again whilst still controlling the spread of the virus.

But the Prime Minister Boris Johnson warned that it relies heavily on the rate of infection - if the "R" rate (the number of people one person can infect) looks to rise above 1 again he will slam on the brakes.