UK economy faced largest drop in 300 years amid recession scare
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The British economy shrank by 11% in 2020, its largest drop in 300 years, revised data from the UK Office for National Statistics (ONS) reveal.
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ONS Building (Wales Online)
The UK economy witnessed in 2020 an 11% drop, the biggest since the Office for National Statistics (ONS) began keeping records and the UK’s largest GDP slump since 1709, the year of the ‘Great Frost,’ when the country’s economy shrank by 13.4%, according to historical data provided by the Bank of England.
The downward spiral was triggered by new data showing the effect the COVID-19 pandemic had on healthcare and individual retailers, and forcing the Bank of England to raise its interest rate from 1.25 percent to 1.75 percent.
ONS analyst Craig McLaren explained: “The health service faced higher costs than we initially estimated, meaning its overall contribution to the economy was lower,”, adding that retailers also faced higher costs, which prompted statisticians to go over their contribution to the economy.
Last year, the British economy largely returned to its pre-pandemic levels. However, since the start of this year, it has been increasingly battered by rising inflation, which has reached its highest since 1982, and analysts now fear the country could tip into a recession by the end of the year.
The GDP in Britain dropped by 0.1% between April and June. In the previous quarter, the UK GDP witnessed a rise of 0.8%. It is worth noting that the ONS also stated that in June, the UK economy fell by 0.6%. A recession is marked by a GDP fall in two consecutive quarters.
Christopher Dembik, head of macro analysis at Saxo Bank, said that “What Brexit has not done by itself, Brexit coupled with Covid and high inflation have succeeded in doing,” adding that “The UK economy is crushed.”
The ONS is due to publish its updated growth figures for 2021 and the first half of 2022 in September. The agency routinely updates its GDP estimates when it obtains more data.
