UK economy suffers shock 0.3% contraction
The UK economy shrank by 0.3% in April, according to figures from the Office for National Statistics (ONS), as the cost of living crisis deepened.
The fall comes after a 0.1% decline in March and is despite several City economists predicted growth of 0.1%.
The ONS director of economic statistics, Darren Morgan, said the sharp dip was down to a fall in health sector activity
He added: “A big drop in the health sector due to the winding down of the test and trace scheme pushed the UK economy into negative territory in April.
“Manufacturing also suffered with some companies telling us they were being affected by rising fuel and energy prices.
“These were partially offset by growth in car sales, which recovered from a significantly weaker than usual March.”
Commenting on the GDP figures, Subrahmaniam Krishnan-Harihara, head of research at Greater Manchester Chamber of Commerce, said: “The latest GDP figures show that the UK economy is clearly under stress from rising prices, geopolitical uncertainty, supply chain disruptions and cash flow pressures, which are together constraining business investment.
“Missing expectations of flatlining, the UK economy shrank by 0.3% in April 2022, the second consecutive monthly decline after GDP decreased by 0.1% in March 2022.
“The slowdown in the economy seems to be impacting all sectors: Today’s GDP data shows that services declined by 0.3%, manufacturing by 1.0% and construction by 0.4%. The decline in services is largely attributed to a sharp reduction in health and social work activities, which fell by 5.6% after NHS Test and Trace programmes were drastically scaled down.”
He added: “One silver lining is wholesale, retail and motor trades which recorded a monthly increase of 2.7%. Although we await official data for May, it is possible that celebrations associated with The Queen’s Platinum Jubilee may have enabled retail sales to hold steady and thus contributing positively to economic growth.
“But therein lies a serious concern: UK economic growth is still reliant on consumer spending. Business investment has not picked up and remains well below pre-pandemic levels. Despite the super deduction scheme, weak cash positions and uncertainty around demand could dampen investment intentions. Any intervention from the Government must be to spur investment and reduce the dependence the UK economy now has on consumer spending.”
