So, the U.K. is officially in recession. And not just any recession but ‘the deepest recession since records began’.
The Office for National Statistics said gross domestic product (GDP), fell in the second quarter of 2020 by 20.4% compared with the previous three months, and that is the biggest quarterly decline since comparable records began in 1955.
It cannot be said that the news came as a shock given that the economy substantially shut down in March as a result of Covid. But the decline in GDP is worse than any other EU country or G7 country in the same period.
Commenting on the figures, Nick Leeming, Chairman of Jackson-Stops, said:
“Sadly, this economic announcement hasn’t come as a surprise.
“A large share of our economy is focused on services, hospitality and consumer spending, and with the UK in lockdown from mid-March usual activity levels within these areas simply couldn’t be sustained.
“What’s promising however is that the latest figures from the ONS do indicate that the economy is showing some green shoots of recovery, and just last week the Bank of England revealed that the economic shock triggered by the coronavirus pandemic will be less than initially feared.
“The property market has proved resilient post the market reopening in May and buyer confidence is still high.
“As soon as estate agents were given the green light to return to work we saw the pent-up demand from when the market was closed translate almost immediately into sales.
“This, combined with the stamp duty holiday and many buyers wanting more space in their homes following the lockdown, is causing a spike in transactions across our network. Whilst today’s figures are bleak, even if in line with expectations, this sentiment is certainly not translating into the housing market.
“There is no denying that stamp duty has encouraged more buyers into the market; 41% of our clients at the end of 2019 believed there should be a wholesale reduction in stamp duty across all price brackets. Meanwhile, over a quarter wanted Government to abolish stamp duty on all homes under £500,000.”
David Alexander, joint managing director of apropos, commented:
“Once the decision was made to put the country in lockdown it was inevitable that the economy would enter recession and GDP numbers would show an enormous fall.
“The key issue now is how quickly the economy can recover. Although the quarterly figures are poor, the monthly data shows that the biggest decline occurred in April with some recovery already occurring in June. This could point to a V-shaped recovery.”
“The sales and lettings market have been remarkably buoyant with the increase in the SDLT threshold having a clear impact on buyers.
“The private rented sector has also been remarkably resilient, and we have seen a large increase in new renters since lockdown was eased. This may be temporary but is welcome. Construction has obviously been heavily hit but again may recover more rapidly than some are predicting.”
“The next hurdle will be the levels of unemployment. If they rise suddenly then this could clearly stall the economy and have a consequent impact upon the property sector.
“The success of the Chancellors’ measures to preserve jobs in the services sector (such as the Eat out to help out scheme) will be crucial in determining how rapid the rise in unemployment is and its consequent impact on the wider economy.
“I remain cautiously optimistic at the moment and believe the recovery will be quicker than expected.”