U.K. enters recession with record fall in quarterly GDP

The U.K. economy is in a technical recession following a second quarter of negative growth and the biggest fall in quarterly gross domestic product on record.

Money managers, however, are still positive on the outlook for the country.

U.K. GDP fell 20.4% in the three months ended June 30, with sectors taking hits from the coronavirus pandemic. The drop followed a 2.2% contraction in the first quarter, the Office for National Statistics said Wednesday.

Throughout the recession related to the global financial crisis, GDP shrunk by no more than 2.1% in a single quarter, the ONS said.

Monthly GDP grew by 8.7% in June, up from 2.4% growth in May and a 20% fall in April — another record. But the ONS said June's growth is below February levels of 17.2%. The U.K. went into lockdown in March.

"The economy began to bounce back in June with shops reopening, factories beginning to ramp up production and housebuilding continuing to recover," Jonathan Athow, ONS deputy national statistical for economic statistics, said in a comment accompanying the data. "Despite this, GDP in June still remains a sixth below its level in February, before the virus struck."

The drop in GDP also marks the U.K. as the worst performing economy among leading industrial nations, Charles Hepworth, investment director at GAM Investments, said in an emailed comment.

However, managers remain optimistic on the U.K. economy going into next year.

"Despite negative growth figures for the U.K. announced today, a recession is old news and many economists have known it was coming for a while," Shamik Dhar, chief economist at BNY Mellon Investment Management, said in a comment.

He said the economy is past the worst, having "probably troughed in April or early May," and expects strong growth in the third quarter of over 10% due to pent-up demand.

However, he noted that the outlook remains "highly uncertain."