The UK economy shrank marginally less than initially estimated in the second quarter of this year, but still recorded its largest fall on record and the worst contraction among major economies.
Revised data from the Office for National Statistics show output in the UK dropped 19.8 per cent in the second quarter compared with the previous three months. This is a marginally smaller contraction than the first estimate of 20.4 per cent.
“More complete data has not substantially changed the economic picture, with the UK economy still shrinking by around a fifth in the first half of the year, far bigger than any previous contraction on record,” said Jonathan Athow, the ONS’s deputy national statistician and director-general for economic statistics.
Despite the upward revision, the fall is the largest since the ONS began recording quarterly GDP in 1955 and shows that in the second quarter, the UK economy contracted more than twice as rapidly as those of the US and Germany.
Output growth in the first quarter was revised down by 0.3 percentage points, a contraction of 2.5 per cent, resulting in the economy shrinking by 21.8 per cent in the first half of the year — the fastest pace of any G7 economy.
Services output in the second quarter was revised up by 0.7 percentage points, but still decreased by 19.2 per cent. Together with a revised down Q1 contraction, services output was down by more than a fifth in the first half of the year.
The fall in industrial output was also marginally less severe than initial estimates, dropping 18 per cent over the six months of the year — slightly less than the other sectors.
However, growth in construction was revised down by 0.7 percentage points, with the sector contracting 38 per cent in the first half of the year.
With lockdown measures restricting movement and leaving many shops and restaurants closed, people’s ability to spend was limited over the past quarter. The household saving ratio — the average percentage of disposable income that is saved — increased to a record 29.1 per cent, up from 9.6 per cent in the previous three months.
Businesses also slashed investment by 26.5 per cent in the second quarter — the fastest drop on record, although better than the previous estimate of a 31.4 per cent cut. By comparison, business investment was cut by a maximum of 9.8 per cent during the 2008 global economic downturn.
ONS data for July showed output was up 6.6 per cent over the previous month. August figures are scheduled to be released next week, with analysts predicting that the economy is on track to register a record expansion in the third quarter.
However, with the number of coronavirus infections rising and more restrictions being put in place, economists warn that this growth could falter before output returns to pre-crisis levels.
“The renewed Covid-19 restrictions will probably mean that GDP stagnates in Q4, leaving economic activity marooned 5.5 per cent short of its pre-crisis level,” said Ruth Gregory, senior UK economist at Capital Economics.
“The risk now is that renewed containment measures send the recovery into reverse.”