"The government is killing the economy just as much as Covid": The business community reacts to the UK's recession
Figures from across the business community have today called for action from the government as the UK officially enters a recession.
Statistics released by ONS this morning show that the UK has entered its first recession in 11 years, with the economy shrinking by 20.4 per cent between April and June.
Business leaders have said that the news is “no surprise”, but that they expect the government to take action to help the economy recover.
Jonathan Walker, North East England Chamber of Commerce
“While it comes as no surprise to see the UK is officially in recession, the scale of the downturn is still shocking. Following yesterday’s confirmation that the claimant count in the North East is now at 10 per cent, it is clear that we face a difficult road ahead.
“There is a very real danger that this recession will hit our region particularly hard and further entrench the disparities between here and other parts of the country.
“We need an immediate plan from government, working with local organisations and the business community to build a recovery that is based on fairness both within and between regions.”
Suren Thiru, BCC
“The UK suffered an historic contraction in economic activity in the second quarter as the coronavirus closed large parts of the economy.
“The dominant services sector suffered particularly badly in the quarter, with consumer-focused firms hit hardest by the pandemic.
“While there was a pick-up in activity through the quarter from the historically weak April outturn, this is more likely to reflect the release of pent-up demand as the economy gradually opened, rather than an indication of a sustained revival.
“With restrictions steadily easing, the second quarter is likely to prove to be the low point for the UK economy.
“However, the prospect of a swift ‘V-shaped’ recovery remains remote as the recent gains in output may fade over the coming months as the economic damage caused by the pandemic increasingly weighs on activity, particularly as the government support measures wind down.
“Against this backdrop, bold action is needed to immediately inject confidence back into the UK economy.
“This should include supporting businesses to retain staff through a cut in employer national insurance contributions and targeted support to help businesses placed under local lockdowns.”
Laura Suter, AJ Bell
“News that the UK has officially fallen into recession doesn’t come as a surprise, but the scale of the retraction in the economy means it’s the largest UK recession ever.
“The UK economy shrank by 20.4 per cent in the second quarter as the country fell into lockdown and businesses shut their doors.
“The figure for June is key, as we all knew that lockdown measures would have a big impact on the economy but what we still don’t know is how quickly the UK will rebound.
“Figures showing GDP growth of 8.7 per cent in June are encouraging – albeit this is coming from a very low base after the falls in May and still sits far below the pre-Covid figures from February.
“But July figures are expected to be more positive still, as more businesses reopened and people emerged from their houses to start spending.
“The biggest impact of any recession on households will be job losses. Unemployment figures released yesterday showing that three-quarters of a million fewer people were working in July compared to March confirm that the crunch of the recession is already being felt by many.
“The Bank of England expects this figure to jump further as the government’s furlough scheme is unwound and estimates around 2.5 million people will be unemployed by Christmas, meaning more pain is still to come.
“A second wave of the virus will hamper any rebound, as will the effect of some of the localised shutdowns we’ve seen in recent weeks. The much-talked-about V-shaped recovery of the UK economy relies on no second lockdown and also on UK trade talks being successful – presenting two large uncertainties.”
Luke Davis, IW Capital
“These figures are not wholly surprising given the catastrophic impact that lockdown had on many business.
“The word recession in the context of previous years is normally a by-word for low confidence, but in this case that is not necessarily true.
“Many firms are optimistic about their prospects and want to grow. Resilience is an important part of any business and firms that have survived this period will now be looking forward to growth and opportunity.
“Opportunity comes out of crises, the global financial crash of 2008 led to the creation of the FinTech industry that is now one of Britain’s most successful sectors.
“There will undoubtedly be firms and sectors that will go on to make this impact. If current conditions persist - and there is no second wave - I would be surprised if the recession continues into next quarter.
“The small business community and its success is as important to the economy as anything else in the near future.
“With an economic contribution of over £2tn, the success of the UK economy as a whole may in future hinge on the prosperity of SMEs, start-ups and high-growth firms.
“There are a fantastic range of innovative, growing SMEs that we work with which are likely to drive our private sector forward in the coming years.”
Michael Buckworth, Buckworths
“The worst kept secret in the country is out – the UK has joined the US and Eurozone in entering a recession. This outcome has been consistently predicted since Boris Johnson ordered the UK indoors on March 23.
“But, frighteningly, an unprecedented collapse in GDP and doomsday economic prophecies have been the only consistent message coming from the government since the crisis began.
“It’s almost five months since Boris Johnson’s announcement on that fateful Monday, and yet the government can’t seem to stick to the same message for longer than a week.
“The latest example of this being the threat to close pubs if schools reopen – which came less than a month after the Chancellor announced the ‘Eat out to help out’ scheme to ‘support restaurants and the people who work in them’.
“Worse still, this ill-thought-out threat to close pubs and restaurants comes while the furlough scheme is winding down, leaving business owners with little choice but to make redundancies.
“The government must realise that words have consequences and that their inconsistent messaging is creating a cycle of uncertainty, which is the biggest risk to businesses.
“Although entering a lockdown made a recession inevitable, the government still has the chance to impact how long and vast this recession will be.
“They need to urgently get a handle on their messaging, support businesses and encourage customers to spend again because right now the government is killing the economy just as much as COVID-19.”
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