Countries have been severely hit by the pandemic. The biggest GDPs have shrunk by a considerable size leading to high unemployment rates, political turmoil, falling oil prices, and falling stock markets. The economic turmoil also brings a humanitarian element along with it, causing reverse migration, falling trust from the governments, and affecting the consumer sentiment.
The recession has kicked in, in one of the biggest economies. United Kingdoms’ recession is the worst, as the output shark by 20.4% in the second quarter of 2020, the worst on record pushing the country deep into damage.
As the UK successfully contained the coronavirus, it had to see the devastating effects of the pandemic on the industries due to the strict lockdown measures leading to falling demands and, thus, a disturbed supply chain. The services, production, and construction saw record drops. The finance minister of the country said hard times have approached as people continue to lose their jobs and in the coming months, will continue to do so. He said that there are difficult choices that the state will have to make, but they will get through it together.
The output fell by a cumulative of 22.1% in the first six months of 2020, as compared to the end of 2019. The steep fall is worse than that of Germany, France, and Italy. The worst-hit country by Coronavirus pandemic that is the US also recorded a fall of 10.6%, which is 50% than that of the UK as per the Office of National Statistics.
Talking about the major economies, the G7, the declines in GDP is expected to be less severe than 22.1%. Canada’s GDP is expected to shrink by 12% in the previous quarter as per the Statistics agency, while the economists at Reuters, as per the surveys predict a fall of 7.6% to the GDP of Japan. The huge damage suggests how the lockdown measures have been in place for a longer duration of time in the UK.
China, the first country to report COVID-19 cases, has already resumed the growth, meaning the world’s second-largest economy has already dodged recession. Britain imposed a strict lockdown two weeks later than Italy, ten days after Spain and a week after France, despite swelling coronavirus cases. That meant it took longer to get the spread of the virus under control, which prolonged the need for restrictions that kept many businesses closed. Due to which Italy allowed restaurants, cafes, and hairdressers to open in mid-may whereas, the UK waited until July 4 to do the same. Germany too, allowed shops, such as bookstores, bike shops, and car dealerships, to reopen as early as April 20, almost two months before nonessential retail outlets reopened in the United Kingdom. The relaxation immediately offered a boost to the GDP, increasing 8.7% for the previous month.
The UK economy, which is heavily dependant on the services and household spending, has faced major losses due to consumers locked in their homes, consumer sentiment and demand have been affected hard. To add to it, millions of workers were furloughed, and many have now been laid off.
About 730,000 jobs have been shed since the pandemic shuttered businesses in March, while the old and self-employed too, have been washed off in economic terms due to the wrath of the same.
“Typically, recession data are subject to heavy revisions,” Kallum Pickering- a senior economist at Berenberg in a research note. “Nevertheless, taken at face value, the bigger-than-expected contraction suggests some downside risk to our call of a 9.5% contraction in full-year 2020.” The Confederation of the British industry said a sustained recovery in no means is assured, given the current situation, restricted cash flow, and the demand-supply disruption.
“The dual threats of a second wave and slow progress over Brexit negotiations are also particularly concerning,” Alpesh Paleja, lead economist at the CBI, said in a statement.
In the race to contain the virus, it seems like the UK government has sidelined the economy of which the effect can be seen prominently. Apart from it, the administration has also failed at replicating the trade deals between the EU and the third world countries that will no longer benefit the British exports by the end of 2020.
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