SIMON LAMBERT: This recession is dire but what matters now is how the UK climbs out of the hole - and there are some signs that look promising

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The UK economy is in recession. The ONS’s confirmation that we are technically in recession managed to be both important and perhaps the most meaningless piece of news of this year.

Often with a recession there is a ‘will we or won’t we moment’ as GDP figures are closely watched to see if the economy has contracted for two consecutive quarters.

We’d already seen the figures for the first three months of 2020 and they weren’t pretty, with GDP down 2.2 per cent between January and March.

Yet, there was no doubt whatsoever that the April to June figures were going to make for even more unpleasant reading.

The 20.4% decline in GDP from April to June was the worst quarterly drop on record

Yesterday, the ONS announced the UK economy had shrunk by an astonishing 20.4 per cent between April and June.

This was both a record and the worst performance of any major economy, a depressing piece of news considering how lockdown failed to stop the UK putting in a dire performance on coronavirus deaths.

The ONS says it is better to measure the GDP nosedive over the first six months of 2020, which allows for the pandemic and lockdowns hitting countries at different times.

That brings little solace on the economic front, as it means that Great Britain merely put in a second worst major economy performance, with our 22.1 per cent decline coming only behind Spain’s 22.7 per cent.

The ONS revealed that the UK had been the second hardest hit G7 economy in the first half of the year, a depressing statistic considering the nation's poor coronavirus death record

This recession is so deep that it has wiped 17 years off the UK’s output.

It puts us back at 2003 levels, a year when Boris Johnson was best known as an occasional Have I Got News For You clown, England dramatically won the Rugby World Cup, and the White Stripes riffed their way to number one with Seven Nation Army.

So, why when you consider that even at its severest point Britain’s lockdown seemed more of a voluntary effort that mainland Europe’s tightly-policed ones has our economy suffered the most?

The key is in how consumer dependent it is, the ONS explained.

As lockdown arrived, businesses and shops shut, those who could began to work from home and furlough arrived, consumer spending tanked 23.1 per cent.

This dive in household consumption was responsible for an astonishing 70 per cent of the shrinking of the economy, according to the ONS.

Samuel Tombs, at Pantheon Macroeconomics, said: 'The UK economy has underperformed its peers to an extraordinary degree.'

'The underperformance can be attributed partly to the economy's greater reliance on consumer services spending and the high level of labour market participation by working parents, many of whom have left work to look after children.’

This is all very bad news and an inquest into why we managed to perform so badly economically and on coronavirus deaths is due, but as I said at the beginning of this column in a sense the news that we are in a deep recession is meaningless.

We knew this was going to happen and that the fall would be deep and steep.

What matters now is how well Britain pulls itself out of the Covid-19 hole.

Monthly GDP figures produced by the ONS show that the economy suffered the most in March and April but grew in May and June - overall though it is 17.2% smaller than before February

A glimmer of hope comes from the breakdown of the GDP figures that shows the biggest hits came in March and April, and that May saw a slight return to growth (up 2.4 per cent) and June a bit of a bounce back (up 8.7 per cent), as the economy really began to reopen.

But although they arrive more promptly than they once did, even those GDP figures are backward looking.

To get a better picture of how things are we can look to some indicators that hint at what may follow and keep our eyes open to what is going on around us.

The biggest negative is well known: each day brings yet more news of job losses and the end of the furlough scheme in autumn is widely expected to lead to a wave of redundancies.

Yet, some promising signs that recovery may prove better than expected also exist.

We need to steer the economy further away from relying on such things, but house hunting, mortgage approvals, new car sales and people eating out – with the Chancellor’s help – all point to more consumer confidence than you might think.

Meanwhile, the fact you’ll struggle to buy a hot tub, expensive bike, fancy garden sofa set, pricey sun lounger, or book a holiday let in the UK within the next couple of weeks, bodes well for such a consumer dependent economy.

And for all the complaints that working from home is harming city centre economies, business in the shopping streets, cafes, bakeries and restaurants of the suburbs and major towns seems pretty brisk.

The worry is that this is just the wealthy spending - and the UK’s economy is becoming even more divided between the ‘haves’ and ‘have nots’.

This gulf between the comfortable and the struggling and the intergenerational tension on wealth was a hallmark of the decade after the financial crisis.

As we plan to bounce back from the coronavirus crash, we need to make sure it doesn’t become a defining feature again, learn our lessons from the recent past and put providing opportunity for those feeling left behind at the core of the recovery.