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UK economy enters recession due to record 20.4% contraction in Q2

The UK economy contracted a record 20.4% in the second quarter. Yahoo Finance's Oscar Williams-Grut joins the On the Move panel to discuss.

Video Transcript

ADAM SHAPIRO: I want to head over to London right now and welcome into the stream Oscar Williams-Grut to talk about the really just drastic and dramatic drop in economic performance in the United Kingdom, not only for the quarter, but on an annualized basis. Oscar.

OSCAR WILLIAMS-GRUT: Well, Adam, it's a historic collapse in the second quarter. GDP fell by 20.4%, official statistics confirmed this morning. That was slightly better than economists had forecast, but not by much. And it follows a 2.2% contraction in the first quarter. Now, what all this means is that the UK has now suffered the biggest slump of any developed nation as a result of the COVID-19 crisis. For comparison, in the second quarter, Germany's economy contracted by just 10.1%, and the eurozone average in the second quarter was 11.9%-- so the UK doing almost twice as bad as comparisons on the continent. The chancellor of the UK said today that the figures confirm that hard times are here and said that hundreds of thousands of people have already lost their jobs. And sadly, in the coming months, many more will.

However, the FTSE 100, perhaps surprisingly, is the best performing market today. It's up 2.5% almost. Why is that? Well, partly because these numbers are not a surprise. Many economic indicators had suggested we were on track for a historic collapse. And there was a bit of bright news once you dug into the figures-- in June, the UK economy actually grew by 8.7%, suggesting that while this is the steepest recession in history, it may also be the shortest. The economy is already bouncing back.

However, economists are skeptical that the bounceback will gather enough momentum to see us recover this year. Barclay's today downgraded their forecast for 2020 GDP, saying they expect a 10% fall across the year. Deutsche Bank forecasting an 11% contraction.