Fears that the UK economy could be heading for recession have been stoked further by official data showing that the national GDP shrank by 0.1 per cent in March as compared to February.
According to the Office for National Statistics (ONS), the scale of output across the economy fell back slightly in March, which leaves growth for the first quarter at 0.8 per cent.
Economists had been expecting to see GDP grow by around 1 per cent in the first three months of the year but consumers and businesses are understood to be struggling notably to absorb the price rises that have beset the economy in recent months.
Indeed, the latest data suggests that consumers are generally tending towards restraining their spending quite significantly as they continue to feel the pinch of price increases.
For its part, the British Chambers of Commerce (BCC) has responded to the latest GDP figures by insisting that the Bank of England was wrong to increase interest rates, as it did recently, and that the government should be putting together an emergency budget to support UK businesses.
“The first quarter slowdown is likely to be followed by a mild contraction in economic output in the second quarter as surging inflation, soaring energy bills and higher taxes suffocates economic output by suppressing consumer spending and business investment,” said Suren Thiru from the BCC.
“An emergency budget is urgently needed to give firms the breathing space they need to raise productivity and strengthen the economy, including reversing the recently introduced National Insurance increase until at least the next financial year.”
The Confederation of British Industry (CBI) has called for relevant policymakers to back businesses to help the UK economy return to growth in coming months but conceded that the outlook for the near-term is not particularly positive.
“The economy barely kept its head above the water during a volatile start to the year, but times look set to get that bit tougher,” said Rain Newton-Smith, the CBI’s chief economist.
“The only way to build a resilient economy is a relentless focus on growing productivity and potential output. Business is the solution to both, so should be adequately supported to invest and grow.”
Chancellor Rishi Sunak has sought to pin at least some of the blame for the UK economy’s slight contraction in March on Russian leader Vladimir Putin and the war in the Ukraine.
“Our recovery is being disrupted by Putin’s barbaric invasion of Ukraine and other global challenges but we are continuing to help people where we can,” he said.