Economy

UK GDP slumps over 20% in April as full impact of Covid-19 is felt

GDP slumped by 20.4% in April 2020, following a fall of 5.8% in March, according to the latest figures from the Office for National Statistics (ONS).

It is the biggest monthly fall since the ONS’ series began in 1997, with the measure also falling by 10.4% in the three months to April as government restrictions on movement “dramatically reduced economic activity”.

Further to this, during the month the services sector fell by 19%, which the ONS said was the “largest monthly fall on record”. The largest driver to this drop was wholesale, retail and motor trades followed by accommodation and food services.

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Additionally, when looking at the economic impact during the three months to April, the services sector declined by 9.9% – driven by falls in “nearly every industry”.  Most notably, this included wholesale and retail trade and repair of motor vehicles and motorcycles, which fell by 41.6%, predominantly driven by a reduction in new car registrations, and retail trade, which fell 8.9% as many retailers temporarily ceased trading in April.

Jonathan Athow, deputy national statistician for economic statistics, said April’s fall in GDP is the “biggest the UK has ever seen”, more than three times larger than last month and “almost 10 times larger than the steepest pre-covid-19 fall”.

He added: “In April the economy was around 25% smaller than in February. Virtually all areas of the economy were hit, with pubs, education, health and car sales all giving the biggest contributions to this historic fall.

Manufacturing and construction also saw significant falls, with manufacture of cars and housebuilding particularly badly affected. The UK’s trade with the rest of the world was also badly affected by the pandemic, with large falls in both the import and export of cars, fuels, works of art and clothing.”

Earlier this week ‘Big Four’ accountancy firm KPMG said the continuing impact of the Covid-19 virus is expected to see the UK GDP to contract by 7.2% in 2020, with the economy “unlikely to be able to fully restart” until a vaccine or effective treatments for the virus are available.

This was according to KPMG’s latest quarterly Economic Outlook, which considered four alternative scenarios for the timing of the recovery, based on potential different dates of the pandemic being eradicated in the UK.

Yael Selfin, chief economist at KPMG UK, said: “These are difficult times. The UK economy is amidst the most severe economic downturn in modern times, with no clear end to the current crisis.

“Considerable uncertainty remains around the timing of a vaccine which will impact the timing and speed of the recovery, as well as the extent of any permanent damage to the economy.”

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