Following a decline of 5.8% in March, GDP declined by 20.4% into April. Both figures are completely unprecedented, with the April decline about ten times as steep as the previous record monthly fall.
By industry on the month, overall manufacturing (-24%) and construction (-40%) fell by more than the service sector (-19%), but within the service sector are some huge falls – most obviously an 88% decline in accommodation and food. The category with the smallest hit was public administration as might be expected, but also real estate and finance. Though the ONS would stress that all figures are subject to a good size margin of error, especially at detailed level.
Monthly decline by industry, per cent
With large parts of the economy wholly or partly shutdown, this fall was obviously expected. Angus Armstrong economist at rebuilding economics put it more bluntly “shutting economy down temporarily to save lives is not the same dynamic as a recession/depression. Hand-wringing over one month’s data is not very sensible”. And, as ONS point out, “it is likely that April will be the low point of economic activity”, with other surveys showing more businesses opening up through May and some pick-up in economic activity. This may mean that the total decline is a little less severe than originally anticipated, perhaps with Q2 down closer to a quarter rather than original predictions of around a third.
Either way, while today’s GDP figures are shocking, they aren’t surprising.
What is important now is having the right plan for Britain's economic recovery, and making sure deep damage doesn’t become lasting damage. .
Behind the figures is a tragic human story of how this pandemic has transformed our lives and plunged millions into financial insecurity.
We know nearly 3 million people have already claimed universal credit since March, and this is in spite of the scheme that protects furloughed workers wages. Moreover a harsh light has been thrown on injustices in our economy which can’t be allowed to fester any longer. Looking ahead everything possible must be done to stop the despair of mass unemployment.
The TUC are calling for a national recovery plan that prioritises protecting and creating jobs. The more people in work, the faster we will work our way out of recession. The government should set up a national recovery council with unions and business to plan how we can build back better. We need targeted support for hard hit sectors of the economy, and a jobs guarantee to help those who do lose work. Young workers who are particularly exposed to the industries where the risk of unemployment is highest should be given early access to these schemes.
Our ‘A Better Recovery’ plan has at its heart good jobs: in a reborn manufacturing sector, in the social care sector that is finally getting the respect it deserves, and in the green technology of the future.
And we know operating boldly works. 75 years ago Britain was battered and broke, yet growth under the Attlee government was a record for peacetime. Jobs and public services were prioritised, the economy was strengthened and the public finances were repaired. In contrast under the austerity policies of the past decade, growth was a record low and the public finances got worse not better.
We can and must build back better.
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