The British economy shrank unexpectedly in March as households turned more cautious and strikes hit activity across a wide range of sectors.
GDP fell 0.3 percent in March, the British Office for National Statistics said yesterday.
Economists had expected no change. That left growth for the first quarter at 0.1 percent, the same as recorded in the final three months of last year.
Photo: Bloomberg
The figures temper optimism that the UK is starting to gain momentum and leave the economy on track for anemic gains.
Soaring inflation and rising interest rates have eroded the spending power of consumers and left Britain at the bottom of the G7 nations since the COVID-19 pandemic.
“We’re in a period of virtually no growth,” British Chamber of Commerce head researcher David Bharier said. “The core issues affecting British businesses, such as unprecedented inflation, energy price shocks and record tightness in the labor market, have not gone away.”
The Bank of England on Thursday delivered a more upbeat assessment of the outlook, and the first quarter result was stronger than the unchanged reading the central bank expected.
The central bank erased its forecast for a recession it had expected as recently as February, and said the economy could be 2.3 percent bigger by 2026 than it thought.
“It’s good news that the economy is growing, but to reach the government’s growth priority we need to stay focused on competitive taxes, labor supply and productivity,” British Chancellor of the Exchequer Jeremy Hunt said.
The three main sectors of the economy grew in the first quarter. Services was up 0.1 percent on the quarter driven by increases in information and communication, and administrative and support service activities. Construction was up 0.7 percent and manufacturing up 0.5 percent.
The March figures were held back by widespread signs of weakness in the services sector, which shrank 0.5 percent. Retailers drove that decline with a 1.4 percent drop.
However, growth in industrial production was the strongest in the month for almost two years.
The statistics office said quarterly growth was dampened by the continued industrial strife gripping Britain, with declines in output across education, health, and transport and storage sectors.
“The fall in March was driven by widespread decreases across the services sector,” British Office for National Statistics director of economic statistics Darren Morgan said.
“Despite the launch of new number plates, cars sales were low by historic standards — continuing the trend seen since the start of the pandemic — with warehousing, distribution and retail also having a poor month,” Morgan said.
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