The UK economy declined at the fastest monthly pace on record in March as the coronavirus lockdown caused a fall in activity and demand.
UK gross domestic product fell by 5.8 per cent in March compared with the previous month, the largest drop since the monthly series began in 1997, according to the Office for National Statistics (ONS).
In the first quarter, UK GDP fell by 2 per cent compared with the previous quarter, its largest fall since the financial crisis.
Chancellor Rishi Sunak acknowledged the “significant impact” that the virus was having on the economy, saying that “it is now very likely that the UK is facing a significant recession at the moment and this year".
Output in the services sector, which accounts for 80 per cent of the economy, fell by 1.9 per cent in the first quarter, the largest drop since records began in 1990. The contraction was driven by a 6.2 per cent monthly decline in March and by a significant fall in travel, accommodation and air transport.
Production fell by 2.1 per cent in the first quarter, the fourth consecutive quarterly decline, despite pharmaceutical manufacturers reporting increased output. Construction contracted 2.6 per cent, the sharpest fall across all sectors of the economy.
UK household spending was down 1.7 per cent in the first quarter. Trade was also hit, with a 12 per cent fall in exports and a 5 per cent fall in imports in the first three months of the year.
However, the UK economy performed better than the eurozone, which contracted 3.8 per cent in the first quarter. In the US, output fell by a smaller 1.2 per cent, as lockdown was implemented later.
The UK’s quarterly contraction is however less severe than the latest Bank of England forecast. Last week the central bank estimated that the economy had shrunk by about 3 per cent in the first quarter and would contract by a further 25 per cent in the second quarter. This would mean an almost 30 per cent drop in the first half of 2020, the fastest and deepest recession for 300 years.
However, the ONS cautioned that economic estimates for March and the first quarter “are subject to more uncertainty” due to the challenges it faced in collecting the data under the government’s imposed public health restrictions.