The United Kingdom’s economy has seen nearly 20 years worth of growth wiped out as a result of the coronavirus lockdown measures.
The Office for National Statistics said on Friday that the economy shrank by 20.4 percent in April, the first full month that the country was under lockdown to contain the spread of the virus.
All areas of the economy were hit during the month, in particular pubs, education, health and car sales.
The monthly decline was unprecedented in scale and, adding a 5.8-percent decline in March, means the UK economy is about 25 percent smaller than it was in February.
“This startling fall in activity takes output in April back to around its level in July 2002,” said James Smith, research director at the Resolution Foundation.
With much of the economy still mothballed in May and June, the UK is heading for one of its deepest recessions ever – the Organisation for Economic Cooperation and Development (OECD) has warned that the country is set to be the hardest-hit developed economy this year.
Lockdown restrictions are slowly being eased, which should see the economy start to pick up.
But hopes that the bounceback in the economy will be as strong as the slide have receded given that many restrictions, such as on social contact, are set to remain in place so long as the pandemic is a threat to public health.
The recovery is also set to be held back by the fact that many businesses are not going to make it out of the slump and millions of workers face unemployment.
People are also set to remain wary about going to shops or commuting so long as the virus remains a threat.
Uncertainty over the UK’s trading relationship with the European Union at the start of 2021 is another factor that could keep a lid on business sentiment and the recovery.
Frances O’Grady, general secretary of the umbrella Trades Union Congress, said targeted support for hard-hit sectors of the economy is needed, as well as a jobs guarantee to help those who lose work.
“The more people in work, the faster we will work our way out of recession,” she said.
Companies have largely held off from cutting jobs during the lockdown as a result of the Job Retention Scheme, under which the government pays up to 80 percent of the salaries of workers retained, up to 2,500 pounds ($3,125) a month.
Chancellor Rishi Sunak has said that from August, firms will have to start making contributions to the salaries of workers that are retained but not working, and that the scheme will close two months later.
That has raised concerns that the UK will see a spike in unemployment then.
In total, 8.9 million jobs have been furloughed under the scheme by 1.1 million employers at a cost to the government of 19.6 billion pounds ($25bn).
Even if 10 percent of those lose their jobs, it would increase unemployment substantially. In March, there were about 1.35 million people unemployed.
“It will take a very long time and significant monetary and fiscal stimulus for the economy to climb out of a hole this large,” said Luke Bartholomew, investment strategist at Aberdeen Standard Investments.