UK Economy Flatlines in April, Seized on by Critics as Evidence of Conservative Plan’s Failure
The UK economy experienced zero growth in April, according to official figures released by the Office for National Statistics (ONS). This marks a significant decline from the 0.4% growth recorded in March. A Reuters news agency poll of economists had predicted the 0% performance, citing evidence that wet weather had negatively impacted retail sales and construction output.
The latest GDP (gross domestic product) report from the ONS, the last to be released before the upcoming election, revealed that UK rainfall was 155% above the long-term average in April. As a result, construction output declined by 1.4%, aided by poor demand for construction products in the manufacturing sector. Production also saw a decrease of 0.9%, while the services sector, which accounts for nearly 80% of UK total output, saw only a marginal growth of 0.2%.
Despite the emphasis on the effects of rain, these numbers still present a setback for Prime Minister Rishi Sunak’s key argument that the economy is recovering after the challenges posed by the COVID pandemic and the cost of living crisis. The UK emerged from a brief recession at the end of 2023 with a growth rate of 0.6% in the first quarter of this year. However, economists are now predicting a slower growth rate of around 0.3% for the second quarter, half of what was achieved in the first three months of the year.
As the election day approaches on July 4th, there will be a final set of inflation figures released, followed by a Bank of England interest rate decision the next day. While financial markets and economists do not anticipate a rate cut on June 20th, given the pace of wage growth, there is concern that increasing inflation could lead to further price growth. The current consumer prices index stands at 2.3%, but is expected to decrease with the release of May’s figures.
Chancellor Jeremy Hunt stated that there is still more work to be done, but that the economy is on the right track and inflation is returning to normal levels. He also emphasized the Conservatives’ plan to stimulate growth through tax cuts on work, homes, and pensions. However, Shadow Chancellor Rachel Reeves criticized the lack of growth, stating that the ONS figures expose the damage caused by 14 years of Conservative leadership. She also highlighted Labour’s plan to boost the economy by promoting stability, encouraging private sector investment, and reforming the planning system.
Liberal Democrat Treasury spokeswoman Sarah Olney echoed these sentiments, stating that the Tories have failed to deliver on their promises and have instead presided over economic stagnation and hardship for hardworking families. She also criticized the lack of ambition and vision in the Conservative manifesto, stating that a change in leadership is necessary for economic growth to occur.
Yael Selfin, chief economist at KPMG UK, provided an outlook on the economy, stating that forward-looking indicators suggest a potential for growth in the coming months, with an improvement in consumer sentiment and strong pay growth. However, she also cautioned that the winning party will face a number of challenges that could hinder the UK’s long-term growth potential. KPMG UK expects economic activity to remain sluggish this year, with a growth rate of only 0.5%.