UK economy shrinks as cost of living crisis deepens | Inflation

Britain’s economy contracted unexpectedly in April as soaring energy costs and supply chain disruption dragged manufacturing amid the cost of living crisis.

In figures highlighting the growing risk of recession, Office of National Statistics said gross domestic product (GDP) fell 0.3% on the month, following a 0.1% decline in March, as consumers curbed spending amid rising utility bills. households.

City economists had forecast modest growth of 0.1%. Growth in the three months to the end of April nearly stagnated at 0.2%.

The latest snapshot showed that the three main sectors of the UK economy – the service sector, industrial production and construction – shrank for the first time since January 2021 during the nationwide Covid lockdown.

The decline of the dominant services sector, which accounts for 80% of the economy, was driven by the end of the government’s test and trace programme, pushing the economy into decline in April. The services sector fell 0.3%.

The manufacturing sector also suffered as companies grappled with soaring fuel and energy prices and international supply chain issues, dragging industrial output down 0.6%. Construction also fell 0.4%, following strong growth a month earlier when builders benefited from heavy repair activity after February storms.

Output of consumer services rose 2.6% during the month, reflecting growth in hairdressing and restaurant spending. However, the sector remained below pre-pandemic levels, a sign of the significant damage suffered by businesses during the closures and restrictions.

The figures come amid growing concern over the strength of the economy as Boris Johnson’s government battles with internal Tory divisions over how best to respond to faltering growth and rising cost of life.

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Rachel Reeves, Labor’s Shadow Chancellor, said: ‘These figures are extremely worrying and will add to the worry that families still feel about their own finances and the long-term health of our economy.

“Instead of properly addressing the structural weaknesses and insecurities they have created, the Tories are just using band-aids.”

Rishi Sunak, the Chancellor, said countries around the world were experiencing slowing growth and the UK was not immune to these challenges. “I want to reassure people, we are fully focused on growing the economy to meet the longer-term cost of living, while supporting families and businesses through the immediate pressures they face,” did he declare.

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