The UK economy grew 0.1% overall in the three months to February - a worrying picture of the situation before the coronavirus lockdown.

GDP figures from the Office for National Statistics also show the economy contracted 0.1% during February, following gains in December and January.

The figures will be concerning as they show the economy was already struggling ahead of the restrictions put in place to limit the spread of COVID-19, the illness caused by the coronavirus.

They came on the same day as a new forecast from the National Institute of Economic Research predicting that UK GDP could shrink by 15-25% in the second quarter of the year, with much of the country in lockdown.

Meanwhile, the government revealed that it had received 1.2 million claims for universal credit in the last three weeks - compared to roughly 55,000 a week in normal times.


Separately, latest figures from the Office for National Statistics showed that 29% of firms have temporarily had to cut staff in the face of the coronavirus pandemic and the restrictions put in place to fight it.

The measures were implemented in mid-March and included the closure of non-essential businesses and people being told to stay home aside from a few exceptions.

This has left many businesses and workers struggling, and economists are forecasting a severe recession.

There was a notable fall in construction during February, blamed on the wet weather and flooding, and total production fell by 0.6% in the three months to February, led by a 0.4% decline in manufacturing output.

The services sector grew but it is one of sectors that will be worst-affected by the lockdown announced in March.

Jeremy Thomson Cook, chief economist at Equals, said the figures show that the UK economy entered the coronavirus crisis "at best stagnant, with only the services economy keeping wider GDP above zero".

"Previous periods of slow economic growth in the UK have seen a marked rebound in consumer spending given Brits' propensity to grab a bargain or load up on personal debt; without such a similar impulse, the pistons that fire the UK's economic engine look very stuck."

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Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Looking ahead, we have assumed that GDP will be about 20% below normal during the lockdown, which we expect to last three months.

"This points to a quarter-on-quarter drop in GDP of 1.8% in Q1, followed by a huge decline of about 15% in Q2, though all forecasts merely are ballpark estimates at this stage.

"Thereafter, we are relatively optimistic that a combination of mass testing and contact tracing, together with continued social distancing and occasional localised lockdowns can help to keep virus infection numbers at a level the NHS can manage in the second half of this year, without the government having to maintain the current set of severe restrictions.

"But neither employment nor confidence will return fully to its pre-virus peak this year, suggesting that GDP still will be about 3% below pre-virus levels in Q4."

It comes at the same time as research suggesting that the coronavirus will see companies continuing to go out of business in the next 18 months.

Red Flag Alert's financial modelling estimates that bad debt will peak during the lockdown, rising further, with companies having to contend with £24bn in unpaid bills between now and the end of next year.

Mark Halstead, a partner at Red Flag Alert, said: "Unpaid debt ripple effects through supply chains, meaning that one large company going out of business will financially affect hundreds of other companies. This will prolong the impact of corporate insolvencies, causing another peak in insolvent corporate debt and business failures in about 12 to 18 months' time.

"Debt can have an immediate impact on the security and operation of a company. This will be accelerated as insolvent debt rapidly increases. Businesses may find that customers and suppliers which were in a good shape just weeks ago, are now facing collapse. Spotting the early signs of their difficulties can prove the difference between adjusting payment terms, avoiding incurring further financial losses and finding alternative sources of supply."