United Kingdom Summary
- The UK economy grew marginally in the 3-months to February (having not grown in Q4 2019), prior to the COVID-19 outbreak fully impacting. Industry data pointed to initial negative impacts on sectors exposed to international tourism and supply chains as COVID-19 started to across continents.
Business activity fell to its lowest level since 1998 in March.
- UK PMI business survey data for March showed a significant contraction in UK business activity as firms faced a collapse in demand and the introduction of social distancing measures.
- The contraction was sharpest in the services sectors, likely reflecting the most immediate falls in demand for tourism, leisure and hospitality.
- The manufacturing sector was also impacted with output falling at its fastest rate since 2012 and firms reported a significant deterioration in their supply chains.
- Construction output fell at its fastest rate since 2009 with the largest falls in civil engineering and commercial building.
Job security and household finances impacted in March.
- UK PMI business surveys for March reported the fastest falls in staffing levels across the services, manufacturing and construction sectors since 2009-10.
- UK consumer confidence fell to its lowest level since 1974 in March, with respondents signalling a significant deterioration in confidence about their financial situation (GfK Survey).
- Universal Credit (UC) claims (out of work/low income benefit) rose sharply in March. Over the two week period to 7 April, new claims for UC increased by around 767,000 in the UK.
GDP expected to contract sharply in 2020.
- OBR analysis suggests a fall in UK output of 35% is possible in Q2 2020, if 'lockdown' measures remain in place until June, with a 13% contraction over 2020 as a whole.
- The IMF projects UK GDP to contract by 6.5% in 2020 and to partially recover to 4% growth in 2021.