Economy grows 0.5% – credit industry reaction

14th August 2023

Latest GDP figures have shown that the economy grew 0.5% in June and 0.2% between April to June according to official data from the Office for National Statistics (ONS).

The ONS said the struggling manufacturing sector has experienced a modest rebound in the second quarter and that the economy benefitted from the effects of May’s extra bank holiday. The Bank of England said last week that it expected annual growth of 0.5 per cent this year and next, a modest performance that will help the economy to avoid a recession.

Looking back over the cost of living crisis, the UK economy has grown by just 0.4 per cent since the start of 2022. This is the weakest 18 months of growth since the 1950s, lower than other G7 countries except Germany which went into recession earlier this year. During that period the UK has had the highest average inflation among the G7 (9.1 per cent).

James Smith, Research Director at the Resolution Foundation, said “The good news is that the economy grew by 0.2 per cent in Q2, stronger than the flat growth many had expected. This is a continuation of the UK’s relative resilience as we continue to dodge the technical recession experienced elsewhere in the face of the ongoing cost of living crisis.”

“But the big picture is that the UK economy has expanded by just 0.7 per cent since the start of 2022 – the weakest growth in 65 years outside of a full-blown recession.”

“With the economy continuing to stall, we are far from out of the cost of living crisis woods yet. Such weak growth will feel like a recession to many as families struggle with the ever-rising cost of essentials and higher mortgage repayments.” 

Joseph Rowntree Foundation Chief Economist Alfie Stirling said “GDP growth of 0.2% means little to the 7.3 million low-income families who right now are going without essentials like heating, eating and adequate clothing. Even those who aren’t facing immediate hardship are being squeezed from all sides. As interest rates continue to rise, the already eye watering cost of rent, food and energy is being compounded by the rising cost of credit cards, overdrafts, and mortgages.”

“For too many people, and too many places, the economy simply isn’t working. There are too few good jobs with rising real pay, too few people have the resources to take risks and try something new, and there is too little investment in the things we all need, both now and for the future.”