- The UK economy declined by more than first expected in the first three months of the year, the Office for National Statistics showed on Tuesday.
- It was the country’s largest drop since 1979, when the country was battling major industrial unrest and high unemployment.
- Gross domestic product fell by 2.2% in the first quarter, down 0.2 percentage points from the previous estimate of a 2% fall.
- Households curtailed their spending while other sectors like services, production, and construction all negatively impacted the overall economy leading to the slump in GDP.
- The Bank of England forecast earlier this year that UK GDP could drop more than 30% in the first half of 2020, as the pandemic hits output sharply.
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The UK economy shrank by its largest amount since 1979 in the first three months of 2020 as household consumption drastically reduced during the pandemic, according to data released Tuesday by the country’s national statistics authority.
The country’s gross domestic product for the first-quarter declined by 2.2%, down 0.2 percentage points from the Office for National Statistics’ previous estimate of a 2% fall in output.
Private household consumption declined 2.9% in the first quarter. Similarly, services, production, and the construction sectors all contributed negatively to the GDP, the ONS said.
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The last time the UK was this badly hit was in the third-quarter of 1979, under the early months of Margaret Thatcher’s first government, when the economy declined by the same level of 2.2% driven by industrial strikes, high inflation, and severe unemployment.
“The sharp fall in consumer spending at the end of March led to a notable increase in households’ savings,” Jonathan Athow, deputy national statistician of economic statistics at ONS said in a tweet.
Household savings ratio – which captures net savings as a percentage of disposable income – rose to 8.6% in the first three months of the year, up from 6.6% in fourth-quarter 2019, data from ONS showed.
The Bank of England has projected that the economy could shrink by 30% in the first half of the year, dependent on the duration of lockdown restrictions.
While many parts of the country prepare to reopen in phases, Prime Minister Boris Johnson is already preparing to reimpose a lockdown on the city of Leicester where there is a resurgence of new coronavirus cases.
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