UK economic downturn

LIVE: Property industry reacts to UK falling into recession

The UK has officially plunged into recession after UK GDP tumbles by a record 20.4% in Q2.

This marked the second consecutive quarterly decline after it fell by 2.2% between January and March.

From April to June, there have been record falls in services, production and construction output, which have been particularly prevalent in those industries that have been most exposed to government restrictions as a result of Covid-19.

Private consumption accounted for more than 70% of the fall in the expenditure measure of GDP in Q2. 

Despite the weakness in Q2, the Office for National Statistics (ONS) stated that there was some pick up in June as government restrictions on movement started to ease.

Jonathan Athow, deputy national statistician for economic statistics at the ONS, said: “The recession brought on by the coronavirus pandemic has led to the biggest fall in quarterly GDP on record.

“The economy began to bounce back in June with shops reopening, factories beginning to ramp up production, and housebuilding continuing to recover. 

“Despite this, GDP in June still remains a sixth below its level in February, before the virus struck.

“Overall, productivity saw its largest fall in the second quarter since the three-day week. 

“Hospitality was worst hit, with productivity in that industry falling by three quarters in recent months.”

What is the specialist finance and property industries saying?

Douglas Grant, director at Conister Finance & Leasing Limited, said: “We are facing a significant downturn that could last well into late 2021 and the economy will be hurt by both SMEs closing and mass redundancies for a significant part of the workforce. 

“While yesterday’s unemployment figures hadn’t surged as much as initially feared, the full effect will not be felt until the furlough scheme ends in a few months,” he added.

"SMEs are not just the lifeblood of the economy, it is where innovation and creativity happens. 

“Since the epidemic took hold, the UK government has been quick to back sectors that are resilient to recessions and market volatility, providing financial security and protection through initiatives such as the Bounce Back Loans Scheme. 

“It is imperative that SMEs have a tripartite level of sustainable support from government, alternative and traditional lenders working together to identify and protect the more resilient sectors such as infrastructure, technology and renewables, ensuring their existence guaranteed. 

“This is where alternative lenders that understand the characteristics of specialist SMEs and with the flexibility they offer, empower their staff to make judgement calls on capital requirements often in the infancy stage of lending, can provide the additional support and natural lending progression alongside the larger clearing banks. 

“Larger clearing banks will not be able to keep the UK SME sector alive by themselves."

Brian Berry, chief executive at the FMB, stated that the government must use the forthcoming Budget to invest in our housing stock — both new builds and improving our existing buildings. 

“This will support recovery in the construction industry and create jobs. 

“Construction output plummeted during the coronavirus lockdown, contributing to the UK officially entering a historic recession during the second quarter of this year. 

“While we know that the industry is slowly recovering, output is struggling to regain pre-coronavirus levels. 

“The government must prioritise bringing forward planning reforms and investing in local authority planning departments to help housebuilders start building out new sites swiftly. 

“Investment in construction apprenticeships is also important, as this will create jobs for young people in a sector that has historically struggled with skills shortages.

“…Construction recovery must have local builders at its heart. 

“These small firms employ local people, compete on reputation by delivering high quality work, and train the majority of apprentices in the industry.”

Alastair George, head strategist at Edison, commented: "Today's GDP figures, while a little better than consensus forecasts, confirm the UK's long lockdown has had a correspondingly severe impact on economic performance when compared to other nations. 

“With financial markets now pricing in a steady recovery in activity, the key assessment is whether the current more relaxed set of Covid-19 healthcare measures can stop the infection rate from spiralling out of control again as, from an economic perspective, the UK can ill afford further widespread lockdowns."

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