Bank of England governor Andrew Bailey has said he will be “ready to take action” to help the UK economy weather the coronavirus crisis.
He was speaking after figures showed that the country’s economy shrank by 20.4% in April – the largest monthly contraction on record – as the country spent its first full month in lockdown.
“We are still very much in the midst of this,” Mr Bailey said.
But he said the figure was “pretty much in line” with what the bank expected.
“Obviously it’s a dramatic and big number, but actually it’s not a surprising number,” he said.
The Office for National Statistics (ONS) said April’s “historic” fall affected virtually all areas of activity, as large parts of the economy remained shut to battle the pandemic.
The contraction is three times greater than the decline seen during the whole of the 2008 to 2009 economic downturn.
But analysts said April was likely to be the worst month, as the government began easing the lockdown in May.
What else did the governor say?
Mr Bailey said there were “signs of the economy now beginning to come back into life”, but the big question was how much long-term damage the pandemic would cause.
“That’s the thing we’ve got to be very focused on, because that’s where jobs get lost,” he said.
“Now we hope that will be as small as possible, but we have to be ready and ready to take action, not just the Bank of England, but more broadly on what we can do to offset those longer-term and damaging effects.”
The ONS also published figures for the three months from February to April, which showed a decline of 10.4% compared with the previous three-month period.
News of the slump comes as almost nine million UK workers are having their wages paid by the government, while the number of people claiming unemployment benefit rocketed by 856,500 to 2.1 million in April.
What was the political reaction?
Prime Minister Boris Johnson warned of a “tough” few months ahead, but added: “We will get through it.”
“We’ve always been in no doubt this was going to be a very serious public health crisis but also have big, big economic knock-on effects.
“The UK is heavily dependent on services, we’re a dynamic creative economy, we depend so much on human contact. We have been very badly hit by this.”
Chancellor Rishi Sunak said life would get “a little bit more back to normal” once High Street shops could reopen.
That is set to happen on Monday in England, while shops in Northern Ireland have already been allowed to resume trading. Scotland and Wales have their own timetables for easing restrictions.
In response, shadow chancellor Anneliese Dodds warned that the UK’s economy was shrinking faster than those of other countries.
She said the UK would need “strong action to help us climb out of this as quickly as possible”.