On the surface it doesn’t make for incredibly encouraging reading and absolutely it’s concerning that the dip has been quite as pronounced as it has been, but there are some caveats that should be considered, and also a sense of perspective too.
First and foremost, the UK is a primarily service-focused economy, with 80% of UK GDP coming from the service sector. That’s in comparison to Germany where just over 60% of GDP is created by services.
Secondly the UK, by comparison, had quite a harsh and long-lasting national lockdown compared to other areas of Europe. Italy and Spain, for example, had similarly harsh lockdowns but they didn’t last quite as long.
Fundamentally, there are some important contexts to understand when considering the impact and potential recovery of such a recession. More importantly, that a pronounced and deep dip is more than likely to translate into an equal and similarly quick recovery.
That being said, it’s likely that the slump and subsequent recovery may well usher in large differences in the economy with industries that were already struggling being seen off whilst emerging sectors may receive a relative shot in the arm.
One of the main concerns of such a pronounced drop is that it may create a wave of joblessness and certainly this was one of the government’s main early concerns, hence the furlough scheme announced by the chancellor back in late March.
That seems to have played a fairly crucial part in protecting jobs in the economy, with The BBC reporting that job numbers appear to be recovering fairly quickly.
It reported that there were almost 126,000 new job adverts, the highest weekly number since the Covid crisis began, according to the Recruitment & Employment Confederation. Data from the Office for National Statistics also suggested more adverts were being posted.
One of the jobs in biggest demand according to REC was builders and construction workers, following a boom in house building.
There have been some saying that the recovery has already started, with demand already having increased, and the Bank of England suggesting that a rapid recovery may already be underway.
Housing and property also appear to be leading the charge, with demand and prices surging possibly quicker than in any other area of the economy.
This is due to a number of factors, such as buyer’s pent up demand being unleashed following lockdown, as well a surge in new interest thanks to a focus on home living. That is also coupled with the fact that investors have been looking for safe haven investments with the markets bouncing around like a rollercoaster.
All this put together suggests that the UK economy may well be catching the headlines for the wrong reasons now, but that it may soon be catching the eye for having one of the most spectacular recoveries.