Fears that the UK economy could be heading for a recession have increased after the latest official figures show the national GDP fell back by 0.3 per cent in April.
The data on outputs across industries during April was worse than most economists had been expecting and has reinforced the general sense of pessimism about the UK’s medium term economic prospects.
Among the fundamental challenges currently being faced by companies and consumers across the country is that of inflation, with prices rising at a pace not seen for several decades at least.
For businesses, dealing with quickly rising inflation has been especially tough in many cases because their operations and revenues have only recently recovered from the impacts of the Covid pandemic.
The cost of procuring raw materials has been on the rise, while energy bills have been soaring and inflation across the economy is increasingly putting pressure on wages and consumer spending.
The 0.3 per cent decline in GDP in April follows on from a 0.2 per cent fall in March, with all the major sectors across the economy having seen a reduction in growth during April.
According to the Bank of England, the UK is heading for a “sharp economic slowdown” this year and inflation could well top 10 per cent in the coming months.
Tony Danker from the Confederation of British Industry (CBI) said in response to the latest GDP data: “We’re expecting the economy to be pretty much stagnant. It won’t take much to tip us into a recession. And even if we don’t, it will feel like one for too many people.
“Times are tough for businesses dealing with rising costs, and for people on lower incomes concerned about paying bills and putting food on the table.”
Figures released at the end of April by Begbies Traynor showed almost a 20 per cent increase in the number of UK companies that were in a position of critical financial distress between the first quarters of 2021 and 2022 respectively.
The corporate insolvency group has said that inflationary pressures could well force an upturn in the number of companies being forced out of business over the course of this year.
“For the first time in more than a decade, inflation is the prime concern for businesses,” commented Begbies Traynor’s executive chairman Ric Traynor.
“This could mean that companies which have just been surviving, being kept alive only by government support, finally succumb to the inevitable.”