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The UK economy contracted by 0.3% in April, according to official figures released as the CBI, Britain’s biggest employers’ group, demanded “vital actions” from the government to prevent an inflation-driven recession.
The Office for National Statistics (ONS) had been expected by economists to confirm a slight rise in gross domestic product (GDP) for the month of 0.1% following a small decline in the previous month.
The ONS said each main area of the economy contributed to April’s decline.
Sky News’ economic and data editor Ed Conway said this was “disappointing news” that the economy is falling at the moment.
“This is worse than economists had expected,” he said, explaining that the economy seems to be heading towards contraction or stagnation, and possibly even a recession.
The data chimes with warnings the economy faces a prolonged period of low growth, caused by a cost of living crisis that is only forecast to intensify in the months ahead as energy bills rise to stoke inflation further.
The forecasts have prompted downgrades to growth expectations from the British Chambers of Commerce and the OECD last week, the latter warning that the UK had the weakest outlook of any major economy bar Russia.
The CBI lamented a “toxic recipe” for growth and warned there was a risk that the economy would be a “distant second” to politics in the coming months because of the cost of living crisis, airports struggling to cope, planned national rail strikes and “Groundhog Day” battles with the EU over the Northern Ireland Protocol.
It said that with fewer than 40 days until parliament goes into its summer recess, the countdown is on for action to be taken.
The CBI downgraded its growth outlook to 3.7% for this year, from 5.1% previously, and just 1% in 2023, from 3%.
It said it believes inflation is expected to remain high into the autumn, rising to 8.7% in October, leading to a “historic squeeze” in household incomes, which will hit consumer spending.
“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.
“It’s as clear as day that business investment is one of the few bright spots left in our economy.
“We’ve had weeks of politicking with the country standing on the brink of a summer of gridlock.
“There is only a small window until recess. Inaction this summer would set in stone a stagnant economy in 2023, with recession a very live concern.
“We need to act now to install confidence.”
The CBI called for measures including steps to alleviate labour and skills shortages.
Its chief economist, Rain Newton-Smith, added: “This is a tough set of statistics to stomach. War in Ukraine, a global pandemic, continued strains on supply chains – all preceded by Brexit – has proven to be a toxic recipe for UK growth.”
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