UK economy stalls in February – industry reaction

The UK Economy registered no growth in February, as a contraction in services and production offset strong growth in construction, according to latest Office for National Statistics (ONS) data. Revised figures from the previous month pushed GDP up by 0.4 per cent in January after a 0.5 per cent decrease in December.

TheONS estimated that in February, real gross domestic product registered no growth from the previous month. This compared with the upwardly revised 0.4% growth seen in January. January was initially estimated at 0.3% growth. February’s reading was below the 0.1% market consensus. ONS explained that falls in services and production were offset by growth in construction.

The various strikes by teachers and civil servants certainly played a significant effect on the 0.1%. fall in service output with education falling 1.7% and public administration falling 1.1%.

January’s GDP growth has been revised up to 0.4%. The data also showed that Construction grew by 2.4% whilst Production fell by 0.2%.

Chancellor Jeremy Hunt said he is confident that the UK will beat the poor growth forecasts predicted by the International Monetary Fund (IMF) when it estimated the UK economy will shrink by 0.3 per cent in 2023 and grow by just one per cent next year.

Kitty Ussher, Chief Economist at the Institute of Directors, said “While a flat economy is not usually grounds for celebration, there are some encouraging signs in today’s data. The consumer-facing sectors – notably retail – grew in the month despite bearing the brunt of the cost-of-living crisis, and the construction sector performed strongly. In fact, were it not for the industrial action that took place in the public sector, the economy overall would have grown.”

“Taken together with the upward revision to January’s data, it now seems likely that first quarter growth will come in more strongly than the Office of Budget Responsibility predicted only a few weeks ago.”

Suren Thiru, Economics Director at ICAEW said “These figures suggest that the economy has lost momentum as sky high inflation and strike action continue to drag on key drivers of UK GDP, notably services and industrial production.”

“Recession fears are likely to stalk the UK for some time as the boost to incomes from easing inflation and lower energy bills is substantially offset by rising taxes and the lagged impact of hiking interest rates.”

“A struggling economy and strong likelihood of materially lower inflation should give the Monetary Policy Committee sufficient scope to keep rates on hold next month. Raising rates would further weaken our growth prospects and risk further banking volatility.”