As the impact of the Covid-19 pandemic continues to take a stranglehold on the UK economy the latest figures show that UK GDP is plummeting.
Responding to latest official economic figures, suggesting GDP fell in April by 20.4%, Tej Parikh, Chief Economist at the Institute of Directors, commets: “The economic turmoil caused by coronavirus is unparalleled. The fall in activity is steep, and is likely to scar the UK economy for some time yet.
“Emergency loan schemes have helped stop firms collapsing, but left many saddled with debt. Businesses will be reluctant to hire and spend on new projects as they repair their finances, particularly as social distancing eats into demand and productivity. Firms will continue to face cashflow challenges in the months ahead.
“Having provided businesses life support, the government must now figure out how to stimulate activity. As the furlough scheme winds down, further job losses could be on the cards without additional support for firms’ costs.
“To help spur business investment, the Government must make good on its commitment to broaden existing tax reliefs for research and development. Waiting until later in the year to act will risk more businesses and jobs will be lost.”
Emma Wall, Head of Investment Analyis at Hargreaves Lansdown, comments: “This is a record figure for a monthly fall, and showed weakness across all sectors. Add to that the Organisation for Economic Cooperation and Development (OECD) has pessimistically predicted that the UK will have the worst hit national income, with falls of 11.5% – worse than France, Italy, Spain, Germany and the US. It makes for a painful reading.
“We have certainly had a short, sharp shock, but the more important consideration is what happens next and what shape the recovery takes. A so-called ‘V-shaped’ recovery is a period in which the economy experiences a sharp dip followed by a sharp upward rise, as the shape of the letter suggests.
“‘L-shaped’ recovery is a sharp dip but a slower and steadier increase upwards over time, like the shape of an `L’ slightly tilted. Ultimately, what happens after the furlough scheme has ended will impact which shape the recovery will take.”