Britain suffered a record collapse in economic output in the second quarter of 2020 when COVID-19 lockdown measures were in force and people had few opportunities to spend, though the decline was slightly smaller than first estimated.

Gross domestic product (GDP) shrank by 19.8% in the three months to June compared with the first quarter, slightly less than the initial 20.4% estimate but still more than any other major advanced economy, the Office for National Statistics said.

The fall was the biggest since the Office for National Statistics (ONS) records began in 1955. Other data has suggested Britain is on course for its biggest annual fall since the 1920s.

Britain’s economy had already shrunk by 2.5% in the January-March period as the country entered lockdown in late March.

Households saved a record 29.1% of their income in the second quarter, up from 9.6% in the first quarter, as their ability to spend in shops and restaurants were sharply curtailed during lockdown, while incomes were supported by a government job programme, which ends next month.

“So far the economic data has proved better than the Bank of England initial assumptions, but with COVID-19 cases returning and restrictions increasing, that could soon reverse,” Jon Hudson, a fund manager at Premier Miton, said.

Britain has suffered Europe’s highest death toll from COVID-19, with more than 42,000 fatalities.

Comparing output in the second quarter with its level a year earlier, British gross domestic product is down by 21.5% - the same as in Spain - while France reported a 19.0% decline.

Britain’s economy has rebounded sharply since the lockdown began to ease from May onwards, and Bank of England Governor Andrew Bailey said on Tuesday that he expected the economy would show an annual decline of 7-10% in the third quarter.

However, he warned the expansion was likely to lose pace, with unemployment set to rise to 7.5% later this year, some parts of the economy still facing COVID restrictions and headwinds from a recent jump in cases.

Due to regional spikes in COVID, much of Britain is under a partial lockdown which limits people’s ability to meet others not in their households - hitting the hospitality sector in particular - though schools and workplaces remain open.

Britain’s current account deficit - normally one of the biggest vulnerabilities of the country’s economy - shrank sharply to 2.8 billion pounds ($3.59 billion), or 0.6% of GDP, its smallest in nine years, affected by the slump in global trade caused by the pandemic.

Meanwhile, British house prices rose by the most in four years in September when they jumped by an annual 5.0%, mortgage lender Nationwide said on Wednesday as a sharp rebound in the country’s housing market accelerated.

The increase was stronger than the median forecast of a 4.5% rise in a Reuters poll of economists and average prices hit a fresh record high.

Britain’s housing market has boomed since the coronavirus lockdown with a rush by some buyers for bigger houses outside of urban areas in the new work-from-home age combining with pent-up demand.

Nationwide said about 10% of people it surveyed in September were in the process of moving as a result of the pandemic, rising to 15% in London. A further 18% of those asked said they were considering moving due to the pandemic.

“Behavioural shifts may also be boosting activity as people reassess their housing needs and preferences as a result of life in lockdown,” Nationwide’s chief economist Robert Gardner said.

Housing industry officials have warned that the mini-boom could run out of steam soon with unemployment expected to rise sharply and COVID-19 cases on the rise again.

Nationwide said prices rose by 0.9% in September from August compared with a forecast of a 0.5% increase in the Reuters poll.

Nationwide said the housing market had also been boosted by finance minister Rishi Sunak’s tax cut on house purchases which he introduced in July as he sought to boost the broader economy after its record 20% contraction between April and June.

Bank of England data published on Tuesday showed mortgage approvals hit their highest in almost 13 years in August.

Separately, British supermarket group Morrisons is creating more than 1,000 jobs to pick and pack orders for its services on Amazon, it said on Wednesday.

Morrisons said it was recruiting the additional workers to process customer orders from over 50 stores, covering most of the United Kingdom’s major cities and many towns.

All of Britain’s big four grocers - market leader Tesco , Sainsbury’s, Asda and Morrisons - are adding capacity to their online home delivery operations to meet increased demand during the COVID-19 pandemic.

Online shopping has gone from around 7% of the total UK grocery market at the start of the crisis to about 15% currently and pure online player Ocado reckons it could reach 30% over the next few years.

Last month Amazon expanded its relationship with Morrisons so Prime members have access to its full range on the internet giant’s main website.

Amazon and Morrisons have had a tie-up since 2016 and have been steadily growing their links, leading to speculation that the US group could even emerge as a possible bidder for Britain’s No. 4 supermarket chain.

Reuters