Corona catapults British economy back in time 17 years

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The corona pandemic has left deep marks on the British economy. During the first six months of 2020, 17 years of wealth creation have been wiped out in one fell swoop. The fading aid measures cast doubts about a rapid recovery.

The corona virus can saddle Prime Minister Boris Johnson with serious trauma. An infection with Sars-CoV-2 put the British Prime Minister in hospital for days this spring. In addition, nowhere else in Europe has the pandemic caused as many fatalities as in his country. To make matters worse, the lung virus nowhere on the continent appears to have left such a deep mark on the economy as in the United Kingdom.

With the record shrinkage, the UK ‘crowns’ itself the worst student in Europe. The weakest link in the European Union, Spain, recorded a GDP decline of 18.5 percent at the end of last month. The eurozone plunged 12.1 percent lower. In the United States, the decline was limited to 9.5 percent.

Recession

It doesn’t take long to find the reason for the poor performance. The corona pandemic has led to a record dive and plunged the UK economy into recession. GDP had already contracted by 2.2 percent in the first quarter, ‘the ONS stated. The statisticians calculated that the corona crisis wiped out 17 years of wealth creation in two quarters. In our country this is eleven years.

20.4 percent

the British economy is shrinking
The British economy contracted by 20.4 percent quarter on quarter in April-June.

The great impact in the UK is partly explained by Johnson’s corona approach. The prime minister first focused on building group immunity to defeat the lung virus. It wasn’t until March 23 that British society was shut down. Italy had reached out to that measure two weeks earlier, followed not much later by many other Member States of the European Union.

While governments in mainland Europe gradually began to loosen their grip on society from May onwards, the shutters of non-essential UK stores remained closed until mid-June. Pubs and restaurants were not allowed to reopen until the beginning of July.

Encouraging Signs

“These figures confirm that we are going through a very difficult period,” said British Treasury Secretary Rishi Sunak. But he also sees encouraging signs. “The easing of the lockdown meant that economic activity increased by 8.7 percent in June compared to May.” The construction and manufacturing industry rebounded. And consumers let the money roll again after the reopening of the stores.



A recovery in the form of a V is a long way off. Recent growth could quickly evaporate in the following months as government support measures fade.

Suren Thiru

Economist British Chamber of Commerce

Economists warn against over-optimism. The jump towards the end of the quarter may have come about because households made purchases that they postponed during the lockdown. It is too early to speak of the beginning of a sustainable recovery, ”said Suren Thiru, an economist at the British Chamber of Commerce.

He does not see a sudden revival happening immediately. ‘A recovery in the form of a V is still a long way off. Recent growth could quickly evaporate in the coming months as government support measures fade. ‘

Loonsubsidies

The British government poured a lot of money into wage subsidies to prevent companies from laying off workers en masse. The system, which saved around 10 million jobs, will expire at the end of October.

Minister Sunak is reluctant to extend the aid measure, even though economists warn that the early recovery will be curtailed if hundreds of thousands of people fall without pay and keep their finger on the cut again. Consumer households are a major driver of the UK economy.

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