So it’s official – the UK has entered the deepest recession since records began.
If you’re below a certain age, this might be your first experience of such a financial crisis and you’re probably looking for some reassurance and comfort in these turbulent times.
If that’s the case, then we recommend stopping reading now and watching this video of Mr Mayhem the paddle boarding goat, because recessions are serious business and are generally a bit crap for everyone.
Is there any good news?
There are a couple of silver linings so let’s start with them before we hit you with all the woe.
Now, despite all the blaring headlines and breaking news alerts, it’s not in the least bit surprising for the reasons explained succinctly here by a chap on Twitter...
People are posting charts of GDP as if it's somehow surprising that the economy dropped off a cliff WHEN ALL THE SHOPS SHUT AND PEOPLE COULDN'T GET TO WORK.— Ian Leslie (@mrianleslie) August 12, 2020
A recession is defined as two successive quarters of decline in gross domestic product (GDP), and GDP is essentially all the money that a country makes by people working and spending.
It will not have escaped your notice that during the lockdown, particularly the first part, working and spending were made incredibly difficult by the fact barely anyone was allowed out of the house.
So we knew it was coming but that won’t make it any less painful. As chancellor Rishi Sunak said: “I’ve said before that hard times were ahead, and today’s figures confirm that hard times are here.”
You call that good news?
OK, how about this – have a look at this chart...
Our latest GDP estimates for June show that the UK economy is now 17.2% smaller than it was in February before the full impacts of the #coronavirus #COVID19 pandemic hit https://t.co/8FmcVvX6lz pic.twitter.com/Qgh12prPtt— Office for National Statistics (ONS) (@ONS) August 12, 2020
Obviously everyone is freaking out over the bit where it falls off a cliff but if you look just after that you’ll see it actually shot back up again a little bit.
What that shows is the economy bounced back by 8.7% in June as lockdown restrictions eased.
So today’s the day. We are now in full knowledge of the low in the economy. Not as bad as first feared. Today isn’t about being in a #recession (we knew that already) it’s that the economy bounced back 8% in June. Which is highly promising. A recovery is underway.— Rob Nunn (@robfnunn) August 12, 2020
Will it keep on going up?
Sorry, but it’s unlikely. The big jump is largely due to the difference in total lockdown versus the beginning of phased reopening. Any further lifting of restrictions is unlikely to open up as much of the economy as the initial opening of shops, bars and restaurants.
But another point of hope is that we’ve survived recessions before, the last being during the financial of 2008.
Thing is, this one is way worse as these ominous red bars clearly show.
Yeah, that’s a lot of red.
So how long will it take before we’re back to normal?
No one can really say for sure but experts have warned that Britain faces a “long road ahead” to recovery.
Business groups and economists also cautioned the path of the recovery may not be smooth, given the threat of a second wave and possible further lockdowns, with a jobs crisis also on the horizon as government support measures come to an end.
Melissa Davies, chief economist at research firm Redburn, said: “There is a long road ahead for the UK economy to claw back its pandemic losses, all the while facing deflationary headwinds from large amounts of spare capacity and job losses.
“As the furlough scheme rolls off, more stimulus will be needed to support household incomes, not least if infection numbers rise in the autumn.”
Samuel Tombs at Pantheon Macroeconomics blamed the government’s slow response to Covid-19 for the depth of the UK’s second-quarter contraction.
He told PA Media: “The long duration of the lockdown in the second quarter, due to the Government’s slow response to Covid-19 in March, followed by its failure to prevent the virus from spreading from hospitals, was at the root of the economy’s under-performance in the second quarter.”
He warned the rebound will “peter out in the autumn” with further lockdowns likely.
He said: “The planned reopening of schools next month… probably will have to be accompanied by a renewed curtailment of economic activity in the services sector.
“Accordingly, we continue to expect GDP to be about 5% below its pre-Covid peak at the end of this year.”
What does this all mean for me?
It’s all a bit bleak to be honest. Recessions ultimately have an impact on living standards, but the full effect will largely depend on the scale of unemployment and how long it takes for businesses and the jobs market to recover.
Britain’s unemployment rate is expected to jump when the government ends its huge job subsidy programme in October.
So if you have a job there’s an increased chance you could be laid off and if you’re looking for a job then there are fewer to go round and more people going after them.
Last week the Bank of England forecast it would take until the final quarter of 2021 for the economy to regain its previous size, and warned unemployment was likely to rise sharply.
Employers have already shed more than 700,000 jobs since March, according to tax data.
OK I’ll bite, how bad can it get?
Again that’s hard to say but what we really want to avoid is a depression, which is basically a recession but over a period of years and on a global scale.
The most notable was the aptly titled Great Depression which lasted from from 1929-1939. The US was particularly hard hit and unemployment reached 25%.
It took the Second World War and the huge increase in arms production to pull the US out of the depression which obviously also came with its own downsides.
Can we end on a positive note?
Did we already mention Mr Mayhem?
This article originally appeared on HuffPost UK and has been updated.