The impact on the UK economy from the Coronavirus is now starting to become apparent with the official Gross Domestic Product (GDP) figures released by the Office for National Statistics. The UK economy shrank at the fastest pace since the financial crisis in the first quarter of 2020 contracting by 2% in the first three months to March. This follows zero growth in the final quarter of 2019. What is just as interesting is the decline in the first quarter was driven by a record fall of 5.8% in March, which only reflects one full week when the UK was in lockdown.
The second-quarter GDP announcement will be released in three months’ time and is likely to be a highly watched figure. Last week the Bank of England forecast UK GDP to have fallen by around 3% in the first quarter and a further 25% in the second quarter. This would mean an almost 30% drop overall in the first half of 2020, the fastest and deepest recession for 300 years. Whilst, the economic impact is likely to hit records because of its speed and depth – it is also worth pointing out that the support from the Bank of England and Government has been both extensive and quick to offset the economic impacts.
On Sunday night the Prime Minister announced that the lockdown measures are set to be eased; well in England they are, from today (Wednesday 13th May). People in England will now be allowed to spend more time outside, meet a friend at the park and view a potential new home as the government begins to relax coronavirus lockdown measures despite the death toll continuing to rise. The Government also announced this week that the popular furlough scheme will be extended. A quarter of the workforce, which equates to around 7.5 million people, are now covered by the scheme, which has cost circa £14bn a month. The furlough scheme will be extended to October, however, the government will ask companies to “start sharing” the cost of the scheme from August.
As we emerge from lockdown the warnings are still present globally. Dr Anthony Fauci, the top infectious disease expert in the US, warned bluntly of “really serious” consequences of suffering, death and deeper economic damage if state and local officials lift stay-at-home orders too quickly, even as President Donald Trump pushes the government to act to stabilise a free-falling economy. Dr Fauci’s evidence before a Senate committee came as more than two dozen states have begun to lift their lockdowns as a first step toward economic recovery.
Meanwhile, US Democrats on Tuesday unveiled a $3 trillion coronavirus response package, the largest yet, to fund state and local efforts to fight the pandemic and provide emergency payments to millions. The Health and Economic Recovery Omnibus Emergency Solutions Act, or the HEROES Act was introduced in the House of Representatives and could be voted on in the Democratic-led chamber as early as this week. However, the measure will face immediate opposition from the White House and in the Senate, as President Donald Trump and the Senate’s Republican leaders have said a new round of emergency funding is not yet needed.
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