UK officially in recession for the first time in 11 years

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Media captionRishi Sunak: “We are grappling with something new”

Britain’s economy suffered its biggest recession on record between April and June, as coronavirus lockdown measures officially pushed the country into recession.

The economy shrank 20.4% from the first three months of the year.

Household spending plunged amid the order to close stores, while production at factories and construction also fell.

This pushed the UK into its first technical recession – defined as two consecutive quarters of economic decline – since 2009.

Chancellor Rishi Sunak told the BBC that the government “is grappling with something that is unprecedented” and that it is “a very difficult and uncertain time”.

But Phantom Chancellor Anneliese Dodds blamed Prime Minister Boris Johnson for the scale of the economic decline, saying: “A slowdown was inevitable after the lockdown – but Johnson’s jobs crisis was not. “

How are ordinary people affected?

Kate Treglown, 44, from Walthamstow in east London, is currently out of work due to the coronavirus crisis. She was fired from her advertising job at the end of July after being on leave.

“I worked for 16 and a half years for an advertising agency that promoted live events. Work totally dried up in May, ”she told the BBC.

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Kate Treglown

Kate says she feels “stuck in limbo” – eager to try something new, but unsure of when her children – whom she home-schooled – will return to school.

” There’s work. There are jobs available. But when I look on LinkedIn, every job has hundreds of applications, so the competition is very tough, ”she says.

“I think women really bear the burden of this pandemic when it comes to child care, whether they are working or not. It sometimes depressed me.

“My dismissal money will only last so long and I’m afraid of what the future holds for us at this time. “

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Is there a sign that things are improving?

The Office for National Statistics (ONS) said the economy rebounded in June as government restrictions on movement began to ease.

On a month-to-month basis, the economy grew 8.7% in June, following growth of 1.8% in May.

But Jonathan Athow, deputy national statistician for economic statistics, said: “Despite this, gross domestic product (GDP) in June is still a sixth below its February level, before the virus struck. “

Which parts of the economy have suffered the most?

The ONS said the collapse in production was due to the closure of stores, hotels, restaurants, schools and auto repair shops.

The service sector, which powers four-fifths of the economy, suffered the largest quarterly decline on record.

Factory closures also resulted in the slowest car production since 1954.

The economic decline was concentrated in April, at the height of the lockdown.

What is the government doing about it?

Official employment figures released on Tuesday show that the number of people with jobs fell by 220,000 between April and June.

But in an interview with the BBC on Wednesday, Mr Sunak did not hesitate to end the government’s holiday subsidy program, which ends and is expected to end entirely after October.

“I think most people would agree that this is not something that is sustainable indefinitely,” he told the BBC.

The Chancellor said the government should not pretend that “absolutely everyone can and will be able to return to the job they had” and said there would be support for job creation in new ones. areas.

The opposition criticized the government’s management of the economy during the pandemic.

Ms Dodds said: “We already have the worst excess death rate in Europe – now we are also on the way to the worst recession. It is a tragedy for the British and it happened under the watchful eye of Boris Johnson. ”

Referring to the gradual reduction in the holiday scheme, she said the government had “snatched wage support from companies that had not even reopened yet”.

How are companies doing?

Laura Tenison, founder of clothing company JoJo Maman Bebe, told the BBC that the business performance of its 90 stores showed huge variation, with urban areas suffering from a shortage of office workers and tourists.

“The ones like York, Windsor, central London, Reading, Norwich – those are absolutely terrible, really, really horrible,” she said.

“I mean, some days we don’t take money, let’s put it that way. But some of the shops in the village, the community shops, are actually doing better than we expected.

“I think we have six stores in the portfolio which are actually up from last year. ”

Ms. Tenison founded her business in 1993, during a recession. “This is my third recession in my relatively long life in retailing,” she said.

“We still need to be entrepreneurial,” she added. “We had to close some business sectors because of Covid. We had to shut down our American business, which is just a huge sadness for me.

“Of course everyone has to look at their overhead, but be creative. Look at these opportunities. Recessions bring opportunities. “

What are others saying?

Business groups have urged the government to do more to support the economic recovery.

Alpesh Paleja, an economist at the Confederation of British Industry, said many companies were struggling to pay their bills on time.

He said: “A sustained recovery is by no means assured. The double threat of a second wave and the slow progress of Brexit negotiations are also of particular concern. “

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Media captionWhat is a recession?

While more recent data suggests the recovery is gaining momentum, the Bank of England does not expect the economy to return to its pre-pandemic size until the end of next year.

The Office for Budget Responsibility, the government’s official forecaster, expects the recovery to take even longer.

How does the UK compare to other countries?

The UK’s slump is one of the biggest among advanced economies, according to preliminary estimates.

The economy is more than a fifth smaller than it was at the end of last year. This decline is not as severe as the 22.7% drop in Spain, but about twice the size of the contractions in Germany and the United States.

The Chancellor told the BBC that the UK economy has performed less well than its EU counterparts because it focuses on services, hospitality and consumer spending.

“These types of activities represent a much larger part of our economy than for most of our European cousins,” he said.

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