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Finance & Innovation

The UK Has Plunged Into a Recession Due to COVID-19. The Poorest Will Be Hit the Hardest.

Why Global Citizens Should Care
The United Nations’ Global Goal 10 calls for reduced inequalities and inclusive economies. The latest data on the UK’s economic recession — and the worrying impact it looks set to have on the country’s most financially and food insecure — shows all the more need for a COVID-19 recovery that is sustainable and inclusive. Join us to find out more about how you can safely take action to fight coronavirus and help your community here.

The UK woke up to some disappointing, but not hugely surprising, news on Wednesday. The official data is out and confirms that the country’s economy has suffered a deep recession in the past few months due to the COVID-19 pandemic shutdown.

A recession was expected, but what is shocking is the extent of it. From April to June — the second quarter of 2020 — the size of the economy fell by 20.4%, the Office of National Statistics (ONS) data shows. That’s the biggest quarterly fall since comparable records began in 1955.

It’s also the most dramatic dip in Gross National Product (GDP) seen among G7 countries during the same period. The G7 is a group of the world’s most advanced economies that includes Canada, France, Germany, Italy, Japan, the US, and the UK. 

There could be a number of reasons for this outcome, the Guardian economics editor suggests. For example, the later start to the UK’s lockdown might have impacted April to June more than other countries, and the nature of the UK’s largely service sector-based economy means relying more on face-to-face interactions that were not possible in lockdown. 

Still, whatever the reasons, there is no doubt that this huge economic blow spells difficulty and financial hardship for millions of people, especially those living with the lowest incomes or who are out of work. 

Experts are deeply concerned about an even further rise in unemployment — ONS data shows that 750,000 fewer people were on payroll in June, compared to March.

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Research from the Resolution Foundation thinktank back in August 2019, well before coronavirus hit, also warned that people living on low and middle incomes in the UK would be vulnerable if a recession were to hit.

In light of this week’s news, charities such as the Salvation Army have stated that bold action will be needed to prevent a rise in homelessless. The organisation warned that the situation risks a rise in rough-sleeping, as well as families being housed in expensive, temporary hostels.

The UK government’s food safety watchdog Food Standards Agency also published research on Wednesday saying that food insecurity has shot up during the last few months. 

An astonishing 1 in 10 of the people they spoke to had accessed food through a charity or food bank in June. Young people and households with children were hit particularly hard. Some 23% of 16-24 year olds in the sample surveyed had accessed food from a food bank in June, and 13% of families with children had done too, compared with 5% of adults without children. 

Food during the COVID-19 crisis has been a "continual source of concern and worry," the report authors wrote. "Many quickly cut calorie intake and reduced the quality of food eaten — with far-reaching physical and emotional impact."

"These reports speak of the brutal reality of being too poor to put a meal on the table and how debilitating this is for households with children," Anna Taylor, executive director of the Food Foundation, told the Guardian. "All scenarios point to a worsening of this bleak situation unless the government acts now."

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Recent research from the Institute of Fiscal Studies (IFS) published on June 25 shows that the British economy was already faltering even before the pandemic hit. 

Analysing the state of the economy as it stood in February 2020, the IFS pointed to wage stagnation, especially for the lowest incomes, and a lack of improvement in people’s standards of living as worrisome trends. It also found "disappointing" progress on reducing absolute poverty over the past 10 years, compared with previous decades. 

"Workers whose livelihoods look most at risk during the COVID-19 crisis already tended to have relatively low incomes," the report authors noted, "[They] were relatively likely to be in poverty, prior to the onset of the crisis."

The Chancellor of the Exchequer Rishi Sunak has said of the economic news that "hard times are here," after he had warned of the recession for months. But he added that "people would not be left without hope or opportunity."

Sunak suggested that the next budget, which is set to be announced in the fall, should include rescue measures and should focus on generating "fresh opportunity," rather than on saving old jobs, the Telegraph reported.