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Coronavirus: GDP figures show UK economy was struggling before COVID-19 lockdown | Business News



The UK economy grew by 0.1% in the three months to February – a worrying picture of the situation before the coronavirus lockdown.

The monthly figures from the Office for National Statistics show that the economy contracted 0.1% in the month of February, following an 0.1% rise in January and an 0.2% rise in December.

The figures will be concerning, as they show the economy was already struggling ahead of the restrictions put in place to limit the spread of COVID-19, the illness caused by the coronavirus.

The measures were implemented in mid-March and included the closure of non-essential businesses and people being told to stay home aside from a few exceptions.

This has left many businesses and workers struggling and economists are forecasting a severe recession as the country recovers from the pandemic and its effects.

Rob Kent-Smith, head of GDP at the ONS, said: “Today’s figures show that in the three months to February, which was before the full effects of coronavirus took hold, the economy continued to show little to no growth.

“Most elements of the services sector grew, though manufacturing continued to decline.

“Construction saw a notable fall in February, as wet weather and flooding hampered house building.”

Total production also fell by 0.6% in the three months to February, led by a 0.4% decline in manufacturing output.

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Jeremy Thomson Cook, chief economist at Equals said the figures show that the UK economy entered the coronavirus crisis “at best stagnant, with only the services economy keeping wider GDP above zero”.

He added: “With the current crisis being both a demand and supply side shock, the rock on which the UK economy has been built has also been fractured.

“Previous periods of slow economic growth in the UK have seen a marked rebound in consumer spending given Brits’ propensity to grab a bargain or load up on personal debt; without such a similar impulse, the pistons that fire the UK’s economic engine look very stuck.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Looking ahead, we have assumed that GDP will be about 20% below normal during the lockdown, which we expect to last three months.

“This points to a quarter-on-quarter drop in GDP of 1.8% in Q1, followed by a huge decline of about 15% in Q2, though all forecasts merely are ballpark estimates at this stage.

“Thereafter, we are relatively optimistic that a combination of mass testing and contact tracing, together with continued social distancing and occasional localised lockdowns can help to keep virus infection numbers at a level the NHS can manage in the second half of this year, without the government having to maintain the current set of severe restrictions.

“But neither employment nor confidence will return fully to its pre-virus peak this year, suggesting that GDP still will be about 3% below pre-virus levels in Q4.”

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It comes as the government said it has expanded its overdraft with the Bank of England, known as the Ways and Means facility.

The move is to ensure the government has access to funds if the COVID-19 pandemic leaves it unable to raise money from markets easily.

In a joint statement, the Treasury and the BoE said: “The government will continue to use the markets as its primary source of financing, and its response to COVID-19 will be fully funded by additional borrowing through normal debt management operations.

“Any drawings will be repaid as soon as possible before the end of the year.”

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