The UK economy officially entered recession in the second quarter of 2020, with GDP falling by a record 20.4% between April and June, the worst contraction among major economies including the US and eurozone. The decline, driven by the coronavirus lockdown, marks the first recession in over a decade.
Despite the grim economic data, the FTSE 100 closed at its highest level in over three weeks, rising 125 points to 6280. Every sector rallied, led by utilities, healthcare, basic materials and energy companies. Analysts attributed the surprising market response to the recession being 'priced in', with investors betting on low interest rates and fresh stimulus measures from central banks.
Among the top performers, Just Eat Takeaway saw revenues surge to €675m in the first half, up from €179m, as orders rose by 32% due to lockdowns. Admiral Group posted a 30% rise in pre-tax profit to £286.1m, despite a 4% fall in turnover, after pledging to repay £100m to customers. ASOS shares hit their highest since December 2019 after forecasting full-year revenue growth of 17-19%.
Economists noted that the construction sector improved 23.5% month-on-month in June, while services rose 7.7% and manufacturing 11%. However, business investment slumped as companies protected cashflow. Nomura's chief UK economist George Buckley said that while Britain's economy suffered worse than its European peers, the bouncebacks in industrial production offered some hope.
Professor Jonathan Portes argued that the UK's poor handling of the pandemic undermined confidence, stating: 'Those countries that did get it under control have clearly benefited.' The Evening Standard cautioned that rising unemployment could hamper the recovery, despite the potential for a swift bounceback.
