UK economy shrinks 0.3 per cent amid recession worries
The UK economy shrank in April, for the second month in a row, amid fears of a recession.
Gross domestic product (GDP) declined by 0.3 per cent in April, following a 0.1 per cent drop in March, according to figures published by The Office for National Statistics on Monday morning.
The drop was fuelled by a significant reduction in NHS Test and Trace activity, which had driven a decrease of 5.6 per cent in human health and social work.
Services were down by 0.3 per cent and was the main contributor to the fall in GDP.
Production fell by 0.6 per cent while construction was also down by 0.4 per cent. Businesses have struggled in the face of rapidly increasing supply and labour costs.
It was the first time that all main sectors had contributed negatively to a monthly GDP estimate since January 2021.
It comes as the country’s biggest business group has warned a recession is looming if the government does not step in and intervene further.
In the absence of a fresh package of measures before the summer parliamentary recess to boost business confidence, a recession will be “a very live concern,” according to Tony Danker, director general of the Confederation of British Industry (CBI).
Consumers are expected to cut spending from the current quarter through to the first three months of next year in response to real incomes falling 2.3 per cent in 2022, the fastest rate on record, CityA.M. reported on Monday.
Speaking on BBC Breakfast on Monday morning, environment minister George Eustice said the figures were “disappointing”.
“We’re seeing inflationary pressure, we’re seeing it in the US, we’re seeing it in Europe,” he said. “And yes, we’re seeing it here, too, of course. And what we need to do is to work to try to get that inflation under control.”
Alice Haine, personal finance analyst at investment platform Bestinvest, said the contraction was “no surprise”, given that it was the month consumer energy prices were hiked 54 per cent and taxpayers saw an increase in National Insurance while pension allowances were also frozen.
“April also tied in with the damaging effects of Russia’s invasion of Ukraine on the UK’s cost of living, with the fallout coming just as the economy was picking itself up from the coronavirus pandemic,” she added.
Haine said the data “intensifies the likelihood of the UK heading for a prolonged period of stagflation.”