MercoPress. South Atlantic News Agency

Britain's economy shrank 2% in the first quarter and 5.8% in March

“This release captures the first direct effects of the coronavirus pandemic, and the government measures taken to reduce transmission of the virus,” the ONS said

Britain's economy shrank 2% in the first three months of the year, rocked by the fallout from the COVID-19 pandemic, official data showed on Wednesday, with analysts predicting even worse to come.

Gross domestic product shrank in the first quarter compared with the prior three months in the largest slump since the global financial crisis in the fourth quarter of 2008, the Office for National Statistics revealed

Economic output dived by a record 5.8% in March from the previous month, the ONS noted in especially grim news which sent the London stock market down more than one percent in early deals.

”March's GDP figures showed that the UK economy was already in freefall within two weeks of the (coronavirus) lockdown going into effect,“ said Capital Economics analyst Ruth Gregory.

”And with the restrictions in place until mid-May and then only lifted very slightly, April will be far worse.“ Britain implemented its COVID-19 lockdown - which is only just starting to be slowly eased - on Mar 23.

”This release captures the first direct effects of the coronavirus pandemic, and the government measures taken to reduce transmission of the virus,“ the ONS said in a statement. ”There has been a widespread disruption to economic activity,“ it added.

The first-quarter performance was better than France and Italy, which shrank by 5.8 per cent and 4.7 per cent in the same period. Both nations were hit hard by the pandemic - but they began lockdowns earlier than the UK.

”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,“ finance minister Rishi Sunak said in response to the gloomy data.

”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.”

The Bank of England (BoE) had already warned last week that the economic paralysis could lead to Britain's worst recession in centuries.

“With the arrival of the pandemic, nearly every aspect of the economy was hit in March, dragging growth to a record monthly fall,” said Jonathan Athow, deputy national statistician for economic statistics at the ONS.

“Services and construction saw record declines on the month with education, car sales and restaurants all falling substantially.” The pandemic also hit trade globally, with UK imports and exports falling over the last couple of months, including a notable drop in imports from China.

The BoE had forecast last week that UK output was likely to crash by 14% this year.

As the nation's COVID-19 crisis deepened, Sunak unveiled a series of massive packages to help those affected.

The government stepped in to back up employee wages in a so-called “furlough” jobs retention plan, while it also gave tax holidays to businesses and boosted welfare payments.

Sunak on Tuesday announced a four-month extension to the furlough scheme, which will now run until the end of October.

The government says 7.5 million jobs have already been supported by the plan, which ensures employees can receive 80% of their pay up to £2,500 (US$3,100) a month.

The BoE has also been at the forefront of economic firefighting, slashing its main interest rate to 0.1 per cent and pumping £200 billion (US$244 billion) into the UK economy to get retail banks lending.