UK GDP growth expected to slide after Awful April
The UK economy is expected to have contracted in April as the double whammy of tax hikes and higher energy prices help reverse the 0.7 per cent growth gains seen in the first three months of the year.
A Bloomberg poll of economists said City analysts are pencilling in a 0.1 per cent reduction to UK GDP in a month dubbed ‘Awful April’ which saw water bills rise, energy bills spiral and higher employers’ national insurance contributions kick into effect.
The figures, due to be published on Thursday morning, will likely highlight the difficulties UK firms faced in dealing with added cost pressures and President Trump’s tariff turmoil.
They will come a day after Chancellor Reeves delivers the government’s Spending Review on Wednesday afternoon, which will set out commitments on public expenditure for the period between 2026 and 2029.
Investment in artificial intelligence and public transport have already been revealed as key policies aimed at kickstarting growth.
But fresh data will likely serve as a reminder that a £20bn tax raid on employers has held progress on national income back, even as Prime Minister Starmer said last week the UK could not “tax [its] way to growth”.
Underlying growth concerns
City analysts are likely to be keeping a keen eye on purchasing managers’ index (PMI) figures, published by S&P Global each month, with recent numbers revealing a further downturn in construction output while Reeves’ taxes contributed to a flash economic outlook seen as “one of the lowest levels yet recorded” by researchers.
The index showed that the service sector hit a 27-month low in terms of output.
Bank of England Governor Andrew Bailey warned last week business surveys pointed to a weak UK economy, adding that GDP figures for the early parts of the year had been “volatile”.
It followed analysis by the Monetary Policy Committee (MPC) suggesting underlying growth in the first quarter of the year had been closer to zero per cent while analysts at Capital Economics said the economic surge seen this year was “out of whack with business confidence”.
A recent report published by the consultancy said the UK stands to suffer from weakened global demand due to the impact of Trump’s flip-flopping on countries British firms export to.
Officials at the Bank may also be encouraged to cut interest rates in the next three months if GDP figures stumble and quarterly data comes in at around 0.3 per cent, according to analysts at Pantheon Macroeconomics.
Markets are currently pricing in around two more cuts this year, which are expected to be made in August and November.
This would take Bank Rate down to 3.75 per cent by the end of the year but sticky inflation and wage growth figures could make MPC members more likely to vote to hold interest rates.