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From the file

Recession 2021 | 2020 was a year of health crisis. 2021 will be a year of economic crisis.

Charting the crisis

Thursday 22 October 2020

Chris Cook and Chris Newell take us through the numbers


The story of the British lockdown starts with the stop: in March, the population largely stopped what it had been doing. And the consequences of that really show up the two sides of the pandemic.

On one hand, there was
a collapse in the total
weekly hours worked.

This meant a difficult time for business, as our Corona Shock tracker has shown. As a result, GDP, the normal measure of output in the economy, moved in ways that we have never seen before.

This is an index, where ‘100’
is the last GDP reading prior
to the recession, so you can
see the relative depths.

There has been a
hit to incomes.

But government action has meant that, despite this astonishing shock, there has not – yet – been a corresponding rise in the unemployment rate.

The most vulnerable sectors can be identified as those where the largest share of employees were furloughed.

There has been a flipside, though: people whose jobs were safe and secure struggled to spend money. People on fixed incomes, too. And the result was a sudden surge in saving – quite unlike anything ever seen before.

One big question looking ahead is about how these savings get redeployed: people have shown willingness to adopt new ways of spending. The most important question, however, is about state action.

Monthly public sector
borrowing has surged.

This is not unusual: every state is having to do so. The IMF’s forecasts for the year are eye-wateringly large sums.

Public debt is rising
across the board.

But one of the lessons of the past decade is that demand for government debt is stronger than you would think. The interest rate charged to the UK state for borrowing for 10 years is continuously dropping.

This is certainly not a Britain-only trend: states can borrow freely.

They will need to: growth forecasts for the coming years are pretty gruesome.

Next in this file

Don’t know where to go next? Nimo Omer and Claudia Williams have some answers

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