ONS data shows biggest contraction of UK economy in 41 years

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The UK’s economy shrank by 2.2% between January and March official figures for the Office of National Statistics show. The contraction is the joint largest in forty-one-years, on par with the 1979 fall.

Initially, the ONS estimated the contraction would be as high as 2%, but the body tweaked its figure to 2.2% after evaluating the exact drop in economic activity since the outbreak of Coronavirus. The fall is larger than the financial crash in 2008, caused by the collapse of the housing bubble, which led to one of the biggest recessions ever.

The deputy national statistician at the ONS, Jonathan Athow, pointed out that: “Our more detailed picture of the economy in the first quarter showed GDP shrank a little more than first estimated,” after: “all main sectors of the economy shrank significantly in March as the effects of the pandemic hit.”

The Coronavirus health crisis caused GDP to contract, too, by a total of 6.9% as a result of the services industry being sidelined. The UK economy is heavily reliant on the services sector, accounting for 75% of Britain’s entire GDP.

How the government responded

The Prime Minister, Boris Johnson, responded by setting out an economic recovery plan following the effects of COVID-19. Speaking in the West Midlands, Johnson said it’s time to be “ambitious,” and that he planned to “use this moment” to help the nation usher in a new normal. Non-essential shops will also reopen on the 4th of July to stem the tide.

However, his response has drawn criticism from opposition politicians who don’t think the plans go far enough to help the most disadvantaged. Keir Starmer, the Labour leader, declared that there was “not much of a deal and not much that’s new,” while the CBI said the Prime Minister is “not focusing enough on jobs.”

It’s been a challenging couple of months for Mr Johnson. After winning a general election with the first majority since 2015, the Tory party had to negotiate a Brexit deal that appeased backbench Brexiteers and cabinet remainers. Shortly after the New Year, the Coronavirus pandemic hit European shores, causing the continent to become the epicentre and closing down many economies.

Johnson’s approval rating has dropped to -7%, with 50% of the public believing he’s performing poorly.

What are businesses doing?

Businesses are doing their best to limit the damage from the outbreak, with many looking to open up under the new regulations on the 4th of July. Some have managed to stay open with the assistance of free templates from Lucidpress and tweaks to their business plans. This has allowed them to enforce social distancing measures to keep customers safe and continue trading.

However, hundreds of thousands of companies have had to apply for the government’s furlough scheme to keep paying their employees and avoid bankruptcy according to The Guardian. This doesn’t involve self-employed workers on a similar programme.

With this news, many CEOs and entrepreneurs will be desperate to open their doors to the paying public so that they can kick start their dwindling business plans.

What’s next?

Rishi Sunak, the Chancellor, is going to deliver an economic update on 8 July to set out the next step in the country’s recovery.