The figures released by Office for National Statistics (ONS) report that Britain’s economy shrank by 20.4 per cent in the second quarter of the year, worse than any other G7 nation, taking the country into its first recession since the 2008-2009 financial crisis.
Analyst Marcus Stead has shared his views on the matter.
Sputnik: What are the long-term consequences of this recession for the UK as an economy but moreover a country?
Marcus Stead: The Office of National Statistics figures released this week show the employment in the UK fell by 220,000 between May and July - that's the biggest quarter the fall in more than a decade since May to July 2009 to be precise. But that statistic is largely irrelevant. You ain't seen nothing yet, frankly. When furlough ends in October, employers will have to decide whether to bring their staff back to work, or whether to let them go it, will be one or the other; and then we'll have the true picture. The UK Government borrowed a record £127.9 billion between April and June this year.
That figure, over just three months, was more than double £55.4 billion borrowed in the whole of the previous tax year. Borrowing in June was lower than in May at £35.5 billion but even so June's borrowing figure was still the third highest monthly total since records began in 1993, and about five times as the same month last year. Now total government debt is close to £2 trillion, or to put it another way, the debt of the UK government at the end of May 2020 was 100.9% of gross domestic product; the first time that debt as a percentage of GDP has exceeded 100%, since the financial year ending in March 1963.
The sheer scale of the problems facing the country's economy will become clear in the autumn and Chancellor Rishi Sunak won't have any easy solutions. It will likely be paid for by tax rises and cuts to public expenditure and people will need to be prepared for that.
Sputnik: Has the government focused on the economy as much as they should have done?
Marcus Stead: The big thing we need to look at first of all is how little do we actually know about this virus. We're still very much at the stage of scientific theories that have evolved as more and more evidence and data is gathered. Where we're at right now, in the grand scheme of things, well yesterday, the world recorded its 20 millionth COVID-19 case. It sounds dramatic but is the virus gradually dying out? Are we experiencing a lull?
And will it flare up again in a major way or in a few months from now? Or is this something that will just be there in the background operating on a low level is something we're going have to live alongside for several years ahead, possibly longer? And the answer to that is we just don't know. Similarly, we don't know the answer to some very basic questions such as; can you have the virus more than once? We just don't know. The government has to strike a balance between protecting public health and protecting the economy and the odd thing is the restrictions being placed on us in the UK and our lifestyles is bizarre and inconsistent, to put it politely.
But when it comes to chucking out time have gone midnight, where people have consumed a lot of alcohol; we saw seen two people clustering in large groups, hugging and kissing, no social distancing. We even saw fights. There were newspaper articles about that over the weekend. So, there's a lot of inconsistency in terms of what's acceptable at the moment.
Sputnik: Can we expect the UK to bounce back, if not, what sort of recovery will we likely experience going forwards?
Marcus Stead: Well, looking at where we are now, in light of today's news and in light of the news that's come out earlier this week; the key point is going to come in the autumn when furlough ends because that really is crunch time for every restaurant, every bar and every pub. Restaurants are going to ask themselves questions such as; can we operate on one third capacity? Can you make a healthy profit? If the answer is no, then I'm afraid you might as well close your business down when furloughing ends in October. Similarly, with the situation with theatres.
Now, a lot of theatres would struggle to operate on one third capacity and the most theatres struggle to operate on one third capacity. There's talk already of the Christmas pantomime season being cancelled this year. Well, a lot of theatre staff, everyone from involved in putting on productions to the ticket office manager to the person behind the bar; the question is going to be if the theatre cannot operate on one third capacity then went furloughing ends it may well be time to sadly lay off a number of staff. Therefore, with that in mind it's only when we get into the autumn and when furloughing comes to an end that'll be crunch point and we'll see just how bad unemployment really is and how bad this recession is going to be.
I'm afraid until we know how long we're stuck in this situation, in terms of social distancing and places of entertainment operating and reduce capacity and the very real possibility that we're going to go back into a form of lockdown, the sort we're already seeing in parts of Lancashire right now and in Preston in particular; I'm afraid the true picture will not be known until furloughing ends in October and it ain't going to be pretty, I'm afraid.
The views and opinions expressed in the article do not necessarily reflect those of Sputnik.