The economic recovery in the UK came to a standstill just before the general elections, proving to be a setback for the current Prime Minister, Rishi Sunak, who has been advocating that the economy is on an upward trajectory. No significant variations were reported in the country’s gross domestic product (GDP) in April when compared to the preceding month, representing a slowing down from the 0.4 per cent growth noted in March, according to data released by the Office for National Statistics on Wednesday. Economists had predicted a slight dip in output by 0.1 per cent.
As the highest interest rate in 16 years continues to burden businesses and consumers alike, the bounce-back from the recession last year seems to be losing its pace. Hailey Low, an associate economist at the National Institute of Economic and Social Research commented, “The UK continues to battle with the fragility on its road to consistent economic recovery, struggling with stagnancy.”
The Labour party seized the opportunity to challenge Sunak’s assertions of economic recovery as the growth rates started to falter. “Rishi Sunak insists we have made progress, but the reality shows a stalled economy with no sign of growth,” noted Rachel Reeves, the Shadow Chancellor from Labour. “The recent figures lay bare the havoc wreaked upon the economy owing to 14 years of Conservative mismanagement.”
Notwithstanding the criticism, Tory ministers have consistently championed the initial growth metrics of the first quarter, illustrating the UK’s steady progress at par with the fastest growing economies among the G7 nations. Echoing the Conservative sentiment, the manifesto unveiled on Tuesday led with the positive outlook, stating that the economy is on an upturn following last year’s slump.
Jeremy Hunt, the Chancellor of the Exchequer indicated that the growth rate over the previous quarter was 0.7 per cent. He stated in a press release: “While there is more work to be done, we are starting to see the economy turn about and inflation return to normal levels. This election presents a clear choice. Voting Conservative will ensure continued economic growth under our clear strategy of reducing taxes on work, homes and pensions. On the contrary, supporting Labour potentially compromises this progress with proposed tax hikes of £2,094 (€2,483) which will impact every working UK family.”
Poor weather conditions have led to a slump in retail sales and output in the construction industry, with manufacturing also witnessing a more severe dip than anticipated. The production of pharmaceutical products, food, beverages and tobacco was identified as the key drive to the 1.4 per cent decline in manufacturing output.
According to the latest figures, service sectors observed a surprising growth of 0.2 per cent in a month, defying expectations of a slight dip. This growth was largely fuelled by the sectors of computer programming, consultancy and publishing, and gains were also noted in the industries of art, entertainment and recreation.
However, the Office for National Statistics (ONS) pointed out a 0.7% contraction in consumer-facing services in April as the retail sector was adversely affected by the higher than average rainfall. The Met Office reported that April experienced rainfall that was 155 per cent more than the long-term average.
As far as monetary policy goes, the Bank of England is optimistic that this slower demand will keep inflation in check, thereby paving the way for it to cut borrowing costs later in the year. Investors, though, aren’t expecting any monetary changes until at least August.
Despite this, the economic forecast for the remaining months of 2024 is not looking overly promising. Economists in the private sector are predicting a modest 0.6 per cent growth for the entire year, marking an improvement from a mere 0.1 per cent in the previous year, but still far from the robust growth rates the UK has experienced in past decades. -Bloomberg