Despite the revised figure, the U.K. economy’s Q2 slump remained the worst contraction in the country’s economic history.
Britain previously posted a 20.4% decline in its gross domestic product reflecting the months between April through June, marking a historic economic slump since 1955. But on Wednesday, September 30, a new and final reading shows that the country’s Q2 drop was not as bad as previously thought.
Britain economy fell 19.8%
The Office for National Statistics (ONS) latest reading suggests that the country’s GDP in the second quarter plummeted by 19.8%, a slightly better figure compared to the first reading of 20.4%.
Still, the office clarified, the recession remained the worst decline since Britain started data recording, and if compared to other advanced countries.
ONS also updated its first-quarter GDP figure with a sharper decline of 2.5%. Its original reading was slightly lower, with a 2.2% drop. And as of this writing, the U.K. economy 21.8% smaller compared to its pre-pandemic size or the fourth quarter of 2019, to be specific.
“It is clear that the UK is in the largest recession on record,” the official added.
However, the chief economists of Bank of England Andy Haldane, on a separate announcement, assured that Britain and its GDP is predicted to make an impressive rally by growing 20% in the third quarter.
Pandemic’s impact on UK households
The recent economic figures also emphasized how massive the pandemic’s influence is to U.K. households.
Household spending, for instance, has dived to a record-breaking 26.3% throughout the months of April to June which is—as to how Samuel Tombs of Pantheon Economics described— “at the root of the U.K.’s underperformance.”
The implementation of stay-at-home protocols in the earliest months of the pandemic has also pushed Britons to save more than spend, sending the household saving ratio to climb as much as 29.1% in the second quarter.
The surge is also significantly higher compared to the first three months of 2020, with an estimated saving ratio of 9.6%.
In a statement quoted by The Guardian, Tombs added:
“The still-low level of consumers’ confidence, which has been weighed down by rising redundancies and the emerging second wave of Covid-19, suggests that households’ saving rate will return in the fourth quarter to a level much higher than seen before the virus struck.”
On contrary, Ruth Gregory of Capital Economics said that “the pain of Q2’s slump in GDP had been borne by the government rather than households and businesses.”
The British sterling, on another note, plunged by 0.3% against the dollar on the same day the latest economic reading was posted.