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UK Economy Falls At Fastest Rate Since 2008 Crash, Tax Rises Loom

UK Economy Falls At Fastest Rate Since 2008 Crash, Tax Rises Loom
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In the first three months of 2020, the British economy contracted at the fastest rate since the 2008 financial collapse, despite coronavirus lockdown measures only being implemented in the final week of March.

The first quarter of the year saw a 2 per cent fall in GDP in the UK, the worst fall since the final quarter of 2008. The decline was driven in large part by March, which alone saw a record 5.8 per cent drop in GDP.

The Office for National Statistics (ONS) said that the economy saw “widespread” declines in the service, manufacturing and construction industries, with the service sector falling by 1.9 per cent, production by 2.1 per cent, and construction by 2.6 per cent.

“This is the largest quarterly contraction since the global financial crisis and reflects the imposing of public health restrictions and voluntary social distancing put in place in response to the Covid-19 pandemic,” the ONS said.

A senior UK economist at Capital Economics, Ruth Gregory told the BBC that the economic data shows that the economy was “already in freefall within two weeks of the lockdown going into effect”.

“With the restrictions in place until mid-May and then only lifted very slightly, April will be far worse,” she warned.

UK Faces ‘Permanent Scarring’ to the Economy with Nearly 12 Million out of Work by the Summer https://t.co/8MKoL7d4uL

— Breitbart London (@BreitbartLondon) April 21, 2020

The government has eased some of the national lockdown measures, saying that businesses that are “allowed to be open, should be open”. However, trade unions across the country have vowed to tell their nearly 3 million members to remain home until the government enacts “the right policies and practices are in place to make workplaces safe”.

The UK is also facing a massive budget deficit, as the country continues to pour money into propping up the fledgeling economy.

A confidential Treasury Department document that was seen by the British newspaper The Telegraph labelled “Official – market sensitive”, claimed that the under the “base case scenario” the government is now expecting a £337 billion budget deficit this year, up from the £55 billion that was projected in the March budget.

Under the worst-case scenario, the government projects that the deficit could rise to as high as £516 billion with a five year budget hit of £1.19 trillion.

The document advised Chancellor of the Exchequer, Rishi Sunak, to cut public spending and increase taxes, to raise £25 billion and £30 billion per year in order to “stabilise debts” — a move that would go against the 2019 Conservative Party general election manifesto, which promised to not raise taxes.

Furlough Extended: UK Coronavirus Job Subsidy Scheme Will Run to October https://t.co/WvWIZXeWad

— Breitbart London (@BreitbartLondon) May 12, 2020

Follow Kurt on Twitter at @KurtZindulka

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