UK coronavirus recession 2020: what the biggest economic downturn in 11 years means - and what happened during the Great Recession

The UK last recorded a recession in 2009
The coronavirus pandemic has already led to the closure of businesses and the loss of jobs (Getty Images)The coronavirus pandemic has already led to the closure of businesses and the loss of jobs (Getty Images)
The coronavirus pandemic has already led to the closure of businesses and the loss of jobs (Getty Images)

The UK has officially entered a recession for the first time in eleven years after the cornavirus pandemic caused the economy to shrink by 20%.

The Office for National Statistics (ONS) confirmed the UK’s nosedive into recession – the deepest recession since records began.

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And experts have warned that the country faces a long-road to recovery despite an 8.7% bounce-back in gross domestic product (GDP).

The grim second quarter figures showed the UK suffered the biggest economic hit from the pandemic in western Europe, even beating Spain’s eye-watering 18.5% drop.

What is a recession?

A recession is defined as two successive quarters of decline in GDP.

Recessions can results in higher unemployment, lower wages and incomes, increased inequality and higher government borrowing.

What happened last time?

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The last recession in UK history took place from the second quarter of 2008 to the second quarter of 2009 with the UK GDP declining by 6%, and was known as the Great Recession. It wasn’t until 2013 that the UK economy recovered to its size pre-recession.

The recession was caused by the late 2000s finacial crisis, the subprime mortgage crisis and a credit crunch, or the sudden tightening of restrictions to borrowing.

During the Great Recession unemployment in the UK rose by 857,000.

Over the past decade the UK has recorded low earnings growth, record low interest rates, record low productivity growth, record public borrowing followed by record cuts in public spending, all as a result of the Great Recession.

What are experts saying about the pandemic recession?

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Experts have warned that hopes of a rapid v-shaped recovery are unlikely.

The Bank of England have warned that the UK economy would not jump back to pre-virus levels until the end of 2021.

Many have also been quick to point out that the UK has performed significantly worse than European peers.

Samuel Tombs at Pantheon Macroeconomics said: “The UK economy has underperformed its peers to an extraordinary degree.”

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“The underperformance can be attributed partly to the economy’s greater reliance on consumer services spending and the high level of labour market participation by working parents, many of whom have left work to look after children,” he added.

Melissa Davies, chief economist at Redburn meanwhile warned that the UK faces “a long road” to recovery.

She said: “There is a long road ahead for the UK economy to claw back its pandemic losses, all the while facing deflationary headwinds from large amounts of spare capacity and job losses.

“As the furlough scheme rolls off, more stimulus will be needed to support household incomes, not least if infection numbers rise in the autumn.”