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GDP statistics and the UK economy

It could take over 5 years for the UK to recover from the coronavirus recession.

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By

Charlie Barton

Updated

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“Money makes the world go around” is an old but true saying and as we’re facing one of the deepest recessions in 70 years (possibly ever) it has never been as relevant as it is right now. Not only did the UK’s GDP fall to -20.4% in April 2020, but now we’re starting to see the long-term effects lurking around the corner. During the recessions in the 80s and 90s it took 2 years for the GDP to recover. Are we looking at the same amount of time now? And what are the reasons for previous GDP falls?

If you haven’t already, it could be time to take a look at share trading providers, as a fall in GDP can mean it’s a good time to get involved. Some investors take advantage of lower stock prices, using this as an opportunity to buy shares in companies they believe will recover from the downturn. As always, past results aren’t indicative of future results.

Quick overview

  • While it is too early to tell, the coronavirus recession is expected to be worse than the Great Recession after the financial crisis in 2009.
  • At the peak of the virus, a third of the world’s population were thought to be in lockdown due to coronavirus.
  • Previous events that impacted UK’s GDP heavily include the 1973 oil crisis, the early 1980s recession and the financial crisis of 2007–2008.
  • Over the 4 previous recessions, it has taken 1 year, on average, for the UK to recover 2.3 percentage points of GDP that was lost. If this outcome were to happen again now, it would take over 5 years for the UK’s GDP to return to the pre-virus growth rate of 1.4%, with 2020’s current projected growth rate standing at -10.4%.

UK’s GDP

As GDP uses imports and exports in its calculation, the UK’s GDP is sensitive to what’s going on around the world. Not only does what’s going on inside the UK affect the UK’s GDP, but the US and China play big roles in determining the UK’s GDP too.

There have been 4 recessions since the 1970s. In 2020, we’re facing a fifth as we speak and it might be one of the worst ones yet. After the financial crash in 2007–2008, the UK’s GDP fell down to -4.2% in 2009 and it didn’t recover until 2014 (2.6%). In April 2020, the GDP for that month alone was -20.4%, but averaged out for the quarter the GDP ended up on -10.4%, the worst it has ever been in modern times.

Over the 4 previous recessions, it has taken 1 year, on average, for the UK to recover 2.3 percentage points of GDP that was lost.

If this outcome were to happen again now, it would take over 5 years for the UK’s GDP to return to the pre-virus growth rate of 1.4%, with 2020’s current projected growth rate standing at -10.4%.

The biggest economies in the world, based on GDP

The 20 biggest economies in the world are the most wealthy countries, with the USA, China and Japan in the top 3. The UK is the sixth biggest economy in the world, with a nominal GDP of $2.83 trillion (£2.24 trillion), close to a 10th of the US’s value.

Country Nominal GDP
USA $21.44 trillion
China $14.14 trillion
Japan $5.15 trillion
Germany $3.86 trillion
India $2.94 trillion
UK $2.83 trillion
France $2.71 trillion
Italy $1.99 trillion
Brazil $1.85 trillion
Canada $1.73 trillion
Russia $1.64 trillion
South Korea $1.63 trillion
Spain $1.4 trillion
Australia $1.38 trillion
Mexico $1.27 trillion
Indonesia $1.11 trillion
Netherlands $902.36 billion
Saudi Arabia $779.29 billion
Turkey $743.71 billion
Switzerland $715.36 billion

Coronavirus, 2020

The coronavirus recession, which has also been called the Great Lockdown is a result of the ongoing coronavirus pandemic. In late February the stock markets crashed and the value of the pound decreased. On 20 March all cafes, bars, restaurants, pubs, leisure centres and schools were closed in the United Kingdom and the UK was put in lockdown on 23 March 2020. We’re all in the same boat though, as it’s believed that more than one-third of the world’s population is in lockdown.

The pandemic has left a huge impact in most countries’ GDP where out of the top 20 economies, only India, Russia and Turkey’s GDPs have stayed above 0%.

Country Q1 2020
USA -4.80%
China -9.80%
Japan -0.60%
Germany -2.20%
India 3.10%
UK -10.40%
France -5.30%
Italy -5.30%
Brazil -1.50%
Canada -2.10%
Russia 1.60%
South Korea -1.30%
Spain -5.20%
Australia -0.30%
Mexico -1.20%
Indonesia -2.41%
Netherlands -1.70%
Saudi Arabia -0.70%
Turkey 0.60%
Switzerland -2.60%

Coronavirus predicted effects on GDP

It’s no secret that COVID-19 will show its effects for a long time ahead and some countries may suffer more than others. Based on the analysis of the worlds economic outlook made by the International Monetary Fund (IMF), it seems like the GDP of all the 30 countries they looked at will bounce back from the crisis by 2021.

Out of the 30 countries analysed, France (–12.5%), Italy (–12.8%) and Spain (–12.8%) may be the 3 European countries that face the worst economic difficulties during 2020.

Country 2018 2019 2020 2021
Argentina –2.5% –2.2% –9.9% 3.9%
Australia 2.8% 1.8% –4.5% 4.0%
Brazil 1.3% 1.1% –9.1% 3.6%
Canada 2.0% 1.7% –8.4% 4.9%
China 6.7% 6.1% 1.0% 8.2%
Egypt 5.3% 5.6% 2.0% 2.0%
France 1.8% 1.5% –12.5% 7.3%
Germany 1.5% 0.6% –7.8% 5.4%
India 6.1% 4.2% –4.5% 6.0%
Indonesia 5.2% 5.0% –0.3% 6.1%
Iran –5.4% –7.6% –6.0% 3.1%
Italy 0.8% 0.3% –12.8% 6.3%
Japan 0.3% 0.7% –5.8% 2.4%
Kazakhstan 4.1% 4.5% –2.7% 3.0%
Korea 2.9% 2.0% –2.1% 3.0%
Malaysia 4.7% 4.3% –3.8% 6.3%
Mexico 2.2% –0.3% –10.5% 3.3%
Netherlands 2.6% 1.8% –7.7% 5.0%
Nigeria 1.9% 2.2% –5.4% 2.6%
Pakistan 5.5% 1.9% –0.4% 1.0%
Philippines 6.3% 6.0% –3.6% 6.8%
Poland 5.3% 4.1% –4.6% 4.2%
Russia 2.5% 1.3% –6.6% 4.1%
Saudi Arabia 2.4% 0.3% –6.8% 3.1%
South Africa 0.8% 0.2% –8.0% 3.5%
Spain 2.4% 2.0% –12.8% 6.3%
Thailand 4.2% 2.4% –7.7% 5.0%
Turkey 2.8% 0.9% –5.0% 5.0%
United Kingdom 1.3% 1.4% –10.2% 6.3%
United States 2.9% 2.3% –8.0% 4.5%

The financial crisis, 2007–2008

The financial crisis of 2007–2008 was a worldwide financial crisis that began in the lending market in the United States and is known as the biggest recession since the Great Depression (1930s). When the biggest economy of the world started to crumble, it reverberated across the whole world.

It caused the Great Recession in the United Kingdom, which was the deepest UK recession since World War Two. The Great Recession left the UK’s GDP at -4.2% in 2009 and didn’t recover until 2014 when it reached 2.6%. Compared to the earlier recessions in the 1970s and 1980s, that left the GDP at -1.5% and -2.0% respectively.

Year UK US
2006 2.50% 2.90%
2007 2.50% 1.90%
2008 -0.30% -0.10%
2009 -4.20% -2.50%
2010 1.70% 2.60%
2011 1.60% 1.60%

The financial crisis took the world with it and caused some of the biggest recessions since the 1930s. Out of the top 20 countries, Russia was the most severely affected as its economy went from 8.5% in 2007 to -7.8% in 2009. The three least impacted were India which lost 1.3% of its total GDP, Indonesia (1.7%) and Australia (2.5%).

Country 2007 2008 2009
Russia 8.50% 5.20% -7.80%
Turkey 5% 0.80% -4.70%
Germany 3.40% 0.80% -5.60%
Mexico 2.30% 1.10% -5.30%
Netherlands 3.70% 1.70% -3.80%
Spain 3.80% 1.10% -3.60%
Japan 1.70% -1% -5.40%
Italy 1.50% -1.10% -5.50%

Previous events that impacted UK’s GDP

Early 1980s recession

In the early 1980s, the government introduced spending cuts and deflationary government policies. During this time company earnings declined by 35% and unemployment rose from 5.3% to 11.9%. Interest rates declined from 17% to 9.6%.

1973 oil crisis

The 1973 oil crisis started when an oil embargo was proclaimed on Canada, Japan, The Netherlands, the United Kingdom and the United States. As a result, interest rates fluctuated between 9% and 15% during this time.

For all media enquiries, please contact

Matt Mckenna
UK communications manager
T: +44 20 8191 8806
matt.mckenna@finder.com@MichHutchison/in/matthewmckenna2

Sources

  • ONS
  • Finder UK
  • Investopedia
  • The Guardian
  • The independent
  • Reuters
  • GlobalNews
  • Bloomberg
  • Statistia
  • IMF

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