UK economy contracts by 2.2% in early 2020
UK economy (GDP) contracts by 2.2% in early 2020 according to the confirmed ONS* figures.
What is GDP?
GDP stands for Gross Domestic Product. GDP is simply the name used for the size of the economy. Our economy in the UK is measured in similar ways to most economies around the globe. If GDP falls, it means the size of the economy has shrunk.
What has happened to GDP?
The ONS* measure the size of our economy every quarter and month. They then publish the results of their findings. The quarterly findings come out a few months after the quarter. The quarter for this report is January to March 2020.
The reduction of 2.2% in our economy is the third largest quarterly reduction on record, and according to the ONS is a result of the public health restrictions resulting from the Covid pandemic. The Services sector reduced by 2.3% and the Manufacturing sector by 1.1%.
How does this compare with other countries?
For comparison, here are the quarterly results for other similar economies. This chart is from the ONS. The EU as a whole is not on the chart but contracted by about 3.2%.
What about more recently?
The monthly figures for April and May show a much bigger contraction in the UK economy. It is likely the economy has reduced by about 25%.
Why has this happened?
The measures taken to control the effect of the Covid 19 pandemic have had a serious impact on business and jobs. According to Jonathan Athow of the ONS:
“Our more detailed picture of the economy in the first quarter showed GDP shrank a little more than first estimated. This is now the largest quarterly fall since 1979….
All main sectors of the economy shrank significantly in March as the effects of the pandemic hit.”
Sources & Notes
The ONS* are the Office National Statistics, the official UK source for economic data.