Britain’s economic recovery ground to a halt in the run-up to the general election, a setback for prime minister Rishi Sunak, who has campaigned on evidence the economy is turning the corner.
Gross domestic product (gdp) was flat in April compared to the previous month, a slowdown from 0.4 per cent growth in March, the Office for National Statistics said on Wednesday. Economists had expected a 0.1 per cent drop in output.
A rebound from last year’s recession appears to be losing momentum after the highest interest rates in 16 years continued to weigh down the finances of both businesses and consumers.
“The UK remains fragile on its route to a sustained economic recovery,” said Hailey Low, associate economist at the National Institute of Economic and Social Research. “The broader perspective remains an economy grappling with stagnation.”
The Labour opposition sought to capitalise on the weaker growth figures that undercut Sunak’s claims that the economy is improving.
“Rishi Sunak claims we have turned a corner, but the economy has stalled and there is no growth,” said Rachel Reeves, Labour shadow chancellor. “These figures expose the damage done after 14 years of Conservative chaos.”
Conservative ministers have repeatedly touted first-quarter growth figures showing the UK matching the fastest expansion in the Group of Seven nations. The opening sentences of the Conservative manifesto released on Tuesday boasted that “growth has returned” following last year’s slump.
Chancellor of the exchequer Jeremy Hunt pointed to figures for the trailing three months showing growth of 0.7 per cent.
“There is more to do, but the economy is turning a corner and inflation is back down to normal,” Mr Hunt said in a statement. “This election is choice. Under the Conservatives, we can keep the economy growing with our clear plan to cut taxes on work, homes and pensions. Or we can risk all that progress with Labour’s £2,094 (€2,483) of tax rises on every working family.”
Wet weather contributed to a drop in retail sales and construction output, while manufacturing also fell more sharply than expected.
A 1.4 per cent drop in manufacturing output was driven by weakness in pharmaceutical products and the production of food, drinks and tobacco.
Services turned in 0.2 per cent growth in the month, which was stronger than the expectation for a small drop. That was driven by computer programming, consulting and publishing. There were also gains in arts, entertainment and recreation.
The ONS said that output in consumer-facing services slipped by 0.7 per cent in April with wet weather hitting the retail sector. Rainfall was 155 per cent of the long-term average in April, according to the Met Office.
The Bank of England hopes that slower demand will rein in inflation, allowing it to reduce borrowing costs later this year. But investors are betting any move will not come until August at the earliest.
But the outlook for the rest of the year remains one of relative stagnation. Private sector economists anticipate a meagre 0.6 per cent expansion for the whole of 2024, up from just 0.1 per cent last year, but well below the trend levels the UK enjoyed in previous decades. – Bloomberg
