Disastrous – the British economy’s balance sheet for the second quarter can hardly be described otherwise. Around one-fifth of economic output was lost in the past quarter, which was marked by a strict corona lockdown for most of the year, compared with the previous quarter – that is more than in all other major industrialised countries. Only if the first quarter, in which the crash already began almost everywhere, is included in the analysis, does the UK no longer fare worse than Spain, the EMU laggard, which was also hit particularly hard by the pandemic – although this is little consolation.
How did it come to this? Only late in the day did the British government take the threat of the epidemic sufficiently seriously and decide to close schools and businesses and impose exit restrictions. Although this meant that the economic losses in the first quarter were still limited, the incidence of infection was all the more serious. Probably also under the impression of his own Covid disease, Prime Minister Boris Johnson then tightened the reins for a long time during the spring months. It was not until the second half of May that industry and construction gradually resumed regular operations, while stationary retail outlets were not allowed to reopen until mid-June, and the catering trade even had to wait until July.
The consequences of this long artificial coma can be seen in today’s figures: The construction industry shrank by 35 percent in the second quarter, even slightly more than the catering trade. This was also reflected in a particularly weak investment demand (-25%). Otherwise, the similarly high losses of around 20% in industry and the service sector show that no sector of the economy was able to escape the devastating consequences of the week-long standstill. Even public consumption shrank significantly, barely fulfilling its function as an economic stabiliser. The export industry still posted the smallest minus, which gave the UK’s otherwise chronically deficient foreign trade the highest trade surplus in decades and the economy as a whole a positive contribution to growth of over three percent.
But there are also rays of hope: the monthly economic figures show a strong recovery since June. Economic output grew by almost nine percent in the final month of the second quarter, which even gives reason to hope for a double-digit result in the current third quarter. Nevertheless, the country will still be far from being able to compensate for the losses incurred. At around eight percent, the gap to the pre-crisis level at the end of the year will probably still be there, and with a decline in GDP of 12 percent, the UK is likely to carry the „red lantern“ in the G20 circle in 2020 as a whole.