Official figures showed that the British economy shrank more than thought between January and March, and shrank by 2.2% in the largest common decline since 1979.
The Office of National Statistics (ONS) revised its previous estimates by a 2% contraction, with all major economic sectors down.
There was a major economic impact in March, as the coronavirus pandemic began to affect.
The data comes as the prime minister prepares to deliver a keynote speech on the economy.
“Our most detailed picture of the economy in the first quarter showed the GDP contraction slightly more than the first estimate,” said Jonathan Atho, deputy national statistician at ONS.
“Information received from the government showed that health activities decreased more than we had shown previously.
“All major sectors of the economy contracted significantly in March after the effects of the epidemic were affected,” he said.
The contraction in the first quarter is now the largest common decline since the period from July to September in 1979.
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“The sharp drop in consumer spending at the end of March has led to a noticeable increase in household savings,” said Mr. Atho. New data showed gross domestic product contracted by 6.9% in March.
The first quarter figures show that the services sector – which accounts for about three quarters of the UK’s gross domestic product – has shrunk by a record 2.3%.
The Office for National Statistics said production output fell by 1.5%, revised in the three months, driven by declines in manufacturing as factories temporarily closed, while there was a drop in construction production by 1.7%.
Coronary virus insurance came into effect only on March 23, so the second-quarter numbers will show a full blow to the economy.
The latest monthly figures for the National Bureau of Statistics showed that the economy fell by 20.4% in April – its biggest fall in one month since registration began.
This deflation was three times greater than the decline experienced during the entire 2008 to 2009 economic downturn.
Out of range
It says something that the first quarter of the year was the worst for the economy in 41 years – yet it was barely still shrinking in activity in just one month – last April.
The figures put the government’s announcement of “building construction” into perspective. Infrastructure spending of £ 5 billion that is being “floated” is not new money anyway. It was put aside in the pre-election statement at a time when the economy seemed very different.
Compare it, for example, with 69 billion pounds, it is estimated that small companies will lose in this epidemic because they had to stop trading (according to research by small commercial insurance companies simply). Or compare it to your total public spending of over 1,000 billion pounds, which is less than 0.5%.
For the size of the economy based on the latest GDP figures, spending on targeted infrastructure is more like 0.25%. The government will have to spend much more to spur recovery from the recession on this scale.
Samuel Toms, the UK’s chief economist at Pantheon Macro Economics, said that the latest figures can be summed up in one line: “The biggest contraction in 40 years, although the first quarter involved only nine days of closure”.
He added that the data “was just an introduction”, with worse in the future.
However, as economists prepare for an awesome set of second-quarter numbers, Howard Archer, at the EY Item Club, believes that the sharp April contraction is likely to be a low point.
He expected that “the economy will return to a clear growth in the third quarter, with GDP growth of nearly 10% on a quarterly basis,” while closing restrictions will be further relaxed.
Later on Tuesday, Boris Johnson is scheduled to deliver a keynote speech on the economy, with a promise to “rebuild better”.
Speaking in the West Midlands, the Prime Minister will say that he wants to use the coronavirus crisis “to tackle the great challenges that are still pending in this country.”
As part of what is expected to be called a “new deal”, Johnson will make plans to accelerate spending of 5 billion pounds on infrastructure projects.
at the same time, ONS data is separate from country finances It showed that Britain’s current account deficit widened more than expected in the first quarter.
The balance of payments deficit – the difference between the value of goods and services imported by the state and the goods and services it exports – rose to 21.1 billion pounds, or 3.8% of GDP.
This means that the UK relies on cash flows from abroad and leaves the pound weak, according to Mr. Toms.
“It is almost certain that the pound will drop sharply again if a second major wave of Covid-19 appears or if the UK and the European Union fail to either sign a trade agreement or extend the transition period before the end of this year,” he said.