The UK economy shrunk by a fifth and fell into its deepest recession on record in the second quarter.
Official data released by the ONS confirmed a 20.4% fall in GDP quarter on quarter. The contraction followed a 2.2% dip in the first quarter, sending the country into a technical recession.
In Germany, GDP fell 11.9% in the first half, Italy shrank 12.4%, France 13.8% while Spain suffered the worst second-quarter slump of any leading economy of 18.5%. The UK’s figures were the worst of any G7 country.
However, there was some news in June as the economy emerged from lockdown and GDP picked up by 8.7% in the month.
The services sector suffered the biggest quarterly decline on record, falling by 19.% in Q2, compared to a fall of 2.3% in Q1. Specifically, accommodation and food services output fell by 86.7% in Q2, reflecting the lockdown measures put in place to prevent the spread of Covid-19.
Commenting on the figures Markus Kuger, Chief Economist at commercial data and analytics firm, Dun & Bradstreet.said “Today’s GDP figures for Q2 2020 confirm the biggest drop on record and the significant impact of the pandemic on UK businesses, in line with Dun & Bradstreet’s macroeconomic baseline scenario. We are forecasting a contraction of 9.8% in real GDP for 2020 and the Dun & Bradstreet country risk rating for the UK remains the lowest on record with a deteriorating outlook due to increased credit risk.”
“Dun & Bradstreet’s latest proprietary data for Q2 shows that payment performance has deteriorated across all 14 sectors tracked during the pandemic, despite several quarters of continuous improvement prior to lockdown. Our data indicates that the number of payments made on time has fallen from an average of 47.2% in March to 42.6% in June, 2020. We expect this to deteriorate further in Q3 as many sectors continue to face cash flow challenges in the wake of lockdown.”
“Corporate liquidations are down for Q2 but this figure is likely to rise as filing requirements revert to normal, government support schemes come to an end and businesses start to repay emergency loans obtained during lockdown. During the coming quarters, it will be more important than ever for businesses to assess potential credit risk across their existing and future business relationships. Our COVID-19 impact index is tracking the potential impact on businesses across the UK by region, industry and size to help companies assess their level of potential risk exposure across supply chains and customer base.”