Rishi Sunak warns UK faces 'significant recession' as economy falls 5.8% in March

Chancellor Rishi Sunak today warned that Britain faces “a significant recession” as latest official figures showed that GDP slumped by an unprecedented 5.8 per cent in March.

The precipitous fall in output during the month dwarfed anything seen in previous downturns and revealed for the first time the scale of the damage to the economy caused by the emergency response to the pandemic.

The fall — described by economists as “devastating” — was almost as deep in a single month as the entire 6.9 per cent drop in output over more than a year of recession during the global financial crisis.

The figure only includes a week of full lockdown, announced by Boris Johnson on March 23, so April’s figure is certain to be far worse.

Mr Sunak told the BBC: “A recession is defined technically as two quarters of decline in GDP.

“We’ve seen one here with only a few days of impact from the virus, so it is now very likely that the UK economy will face a significant recession this year and we are in the middle of that as we speak.”

Speaking to Sky News, he added: “In common with pretty much every other economy around the world we are facing severe impact from the coronavirus.”

He added that was why they had taken action to “support people’s jobs, their incomes, livelihoods at this time and support businesses so we can get through this period of severe disruption and emerge stronger on the other side”.

Over the first quarter Britain’s economy fell by two per cent, the worst since the last quarter of 2008 during the banking crash.

But it was in March that the impact of response to the pandemic began to hit the economy. The services sector, which accounts for nearly 80 per cent of the economy, fell by a record 6.2 per cent.

The productive sectors of the economy, which include manufacturing, fell 4.2 per cent, a monthly decline exceeded only during the strikes of the Seventies.

The figures came as a leaked Treasury report suggested the Government faces a deficit of £337 billion this year forcing Mr Sunak to consider a rise in income tax or a public sector pay freeze.

Shadow chancellor Anneliese Dodds backed the rescue package, including the furlough scheme, but warned scaling back support would lead to more unemployment.

Pablo Shah from forecasters CEBR said GDP could contract by up to 30 per cent in the second quarter.

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