The UK economic system shrank in March, as hovering dwelling prices and the conflict in Ukraine hindered restoration from the pandemic.
Specialists warned {that a} plunge in family incomes meant hassle forward for the economic system and that the danger of a recession was rising.
Official figures present the economic system grew by 0.8 per cent between January and March, down from progress of 1.3 per cent within the earlier three months.
Nonetheless, GDP fell by 0.1 per cent in March, leaving it simply 0.7 per cent above pre-pandemic ranges, the Workplace for Nationwide Statistics (ONS) stated.
Commerce knowledge launched on Thursday confirmed exports fell 3 per cent in actual phrases between March and February and stay 14.6 per cent beneath common 2018 ranges – the final yr earlier than main upheavals ensuing from Brexit.
The figures will act as one other financial warning signal for Rishi Sunak after separate knowledge confirmed retail gross sales had slowed and shopper confidence plunged in Aril.
Actual disposable incomes are forecast to fall by £1,200 per family this yr within the greatest fall in dwelling requirements since comparable data started in 1956.
Regardless of the dire outlook, the chancellor has thus far resisted calls to offer additional monetary assist for individuals struggling to cowl the price of rising payments and better costs for important items together with meals.
Darren Morgan, director of financial statistics on the Workplace for Nationwide Statistics (ONS), stated progress within the newest three months was the bottom for a yr.
He added: “Our newest month-to-month estimates present GDP (gross home product) fell a little bit in March, with drops in each providers and in manufacturing.
Financial progress within the first quarter of the yr was pushed by sectors together with hospitality, transport and journey companies as customers returned to pre-pandemic buying habits.
Development additionally noticed a robust month, thanks partly to restore work after storms in February.
Yael Selfin, chief economist at KPMG UK stated the outlook for Britain’s economic system appeared more and more fraught, with the danger of a recession growing.
“The squeeze on customers has tightened from the second quarter of this yr, with the rise in vitality tariffs and the upper price of meals and different commodities arising from the battle in Ukraine, pushing up the price of dwelling.
“On the identical time, tighter monetary situations and rising rates of interest have seen the price of borrowing improve.”
The Financial institution of England hiked its rate of interest to 1 per cent final week in an effort to tame a surge in inflation which is forecast to peak at 10.25 per cent later this yr. The sharp rise in costs means falling actual incomes for thousands and thousands of individuals as pay rises fail to maintain tempo.
Chancellor Rishi Sunak conceded that these had been “anxious occasions” however stated the UK economic system was rising sooner than the US, Germany and Italy.
“Our restoration is being disrupted by Putin’s barbaric invasion of Ukraine and different world challenges, however we’re persevering with to assist individuals the place we will,” he added.
“Development is one of the simplest ways to assist households within the longer-term, so in addition to easing fast pressures on households and companies, we’re investing in capital, individuals and concepts to spice up dwelling requirements sooner or later.”
Economists have warned the chancellor that his latest tax rises and continued failure to offer extra monetary assist dangers choking off the financial restoration and tipping the nation into recession.
The Financial institution of England forecasts that the UK economic system will barely be larger in 2025 than it was in 2020. It expects the economic system to shrink within the last quarter of this yr when households are hit with one other large rise in vitality payments, leaving them with much less cash to spend elsewhere.
Ed Monk, affiliate director at Constancy Worldwide, stated the newest knowledge indicated that the economic system might tip into recession sooner than the Financial institution has forecast.
“The UK faces a severe battle to keep away from recession this yr,” he stated.
“Hovering vitality, gas and meals costs proceed to eat into family budgets. And whereas some are already having to decide on between fundamental requirements, that is unlikely to be the tip of the squeeze.”
Shadow levelling up secretary Lisa Nandy stated cash is being “sucked out of communities” and that is taking part in out within the slower progress seen in Thursday’s GDP figures.
She instructed BBC Breakfast: “”We have got to get a reimbursement into individuals’s pockets. We have got to get a reimbursement into native communities as a result of in any other case what you see is what we have had for a decade, which is that folks simply merely cannot spend.
“Each pound you set into the pocket of working individuals goes again out into the native economic system and since the Conservative authorities has persistently prioritised tax breaks for the very rich over cash into working individuals’s pockets.
New commerce knowledge confirmed that Brexit was persevering with to harm UK exports. The hole between UK imports and exports grew to widened to £11.2bn in March, from a revised £9.6bn in February.
Imports have been inflated by sharp rises in the price of gasoline since final yr which has been inflated additional by Russia’s invasion of Ukraine.
Excluding erratic costs, the UK commerce deficit widened to the largest on file.
In money phrases, exports had been just like ranges recorded in 2018, earlier than Brexit uncertainty and the pandemic struck. Nonetheless, when the impact of latest value rises is stripped out items exports fell 3 per cent in March and had been an enormous 14.6 per cent beneath their 2018 common degree.
“This suggests that UK exporters have misplaced appreciable market share since Brexit,” stated Gabriella Dickens, senior UK economist and Pantheon Macroeconomics.
,[Exports] will proceed to wrestle as excessive inflation softens up demand for shopper items globally and Brexit continues to restrict the power of exporters to win enterprise from EU clients.”
