UK Economy Contracts At Record Pace

Figures released by the Office for National Statistics (ONS) have indicated the UK economy contracted at a record pace of 5.8% over March 2020. Activity fell to roughly 70% of capacity following the countries decision to enter lockdown in an attempt to curb the spread of Covid-19.

The quarterly reading indicated a smaller 2% fall over Q1 2020, the biggest decline since Q4 2008 but not as large a contraction as some economists had expected. Both the service and manufacturing sectors struggled to adapt to the new trading conditions with the construction sector hardest hit – showing a 2.6% fall in activity over the same time period.

Comparatively, the UK Q1 readings are better than those of France (-5.8%), Italy (-4.7%), Spain (-5.2%) and China (-9.8%) but also represent a smaller proportion of time in lockdown.

The pound had been gradually weakening in the build-up to the release of the data and continues to look vulnerable despite beating market expectations. With the country grappling the various impacts of leaving the European Union and also running one of the highest case numbers of Covid-19 globally, the economic recovery could now be more Swoosh-shaped than V-shaped.