GDP rose 0.1% in February – business industry reaction

Latest Office for National Statistics (ONS) has shown that Gross Domestic Product (GDP) rose 0.1% in February providing another sign of a return to sluggish economic growth this year.

Output from the production industry led the economy’s growth, rising by 1.1%, compared to a fall of 0.3% in January. The figures were in line with what economists were expecting and signals how the UK could be on its way out of a recession.

Chancellor Jeremy Hunt said the new figures were a “welcome sign that the economy is turning a corner. We can build on this progress if we stick to our plan.” 

ONS Director of Economic Statistics Liz McKeown said “The economy grew slightly in February with widespread growth across manufacturing, particularly in the car sector. Services also grew a little with public transport and haulage, and telecommunications having strong months.

“Partially offsetting this there were notable falls across construction as the wet weather hampered many building projects. Looking across the last three months as a whole, the economy grew for the first time since last summer.”

Tina McKenzie, Policy Chair of the Federation of Small Businesses (FSB), said “Positive economic growth in February is certainly welcome, building on January’s momentum and giving a measure of optimism to small firms, who have been battling against strong headwinds for some time now.

“There are signs of cautious recovery among the small business community – but it is important to emphasise that this is not evenly distributed between sectors. It will take more than flashes of growth to raise spirits in the hospitality and retail sectors, for example, whose confidence scores were way below the headline figure for all businesses at the end of last year, according to our Small Business Index. Today’s ONS data shows that these sectors continue to struggle.

“Now the Government needs to ensure that growth among small firms is nurtured, rather than left to wither. It needs to think hard about how to support existing businesses, especially in those sectors which have been hardest-hit, and how to create the best possible environment for start-ups and entrepreneurs.

“In election year, it’s time for politicians to come forward with bold and ambitious plans to help small businesses grow, access finance, take on staff and ultimately deliver day-in, day-out for every customer and community across the UK.”

Dr Roger Barker, Director of Policy at the Institute of Directors, said “The economy barely grew in February, which suggests that the economy is still in a fragile state. After a strong start to the year, the consumer-facing parts of the economy – particularly accommodation and food services – took a backward step. Construction was also surprisingly weak, although there were encouraging signs of revival in production and manufacturing output.

“It appears that the UK’s ascent out of the mild technical recession of last year is a relatively shallow one. Although the latest figures suggest that the UK is likely to generate positive economic growth in the first quarter, there are few signs of a strong economic rebound. The assertion that the UK economy has decisively turned the corner, as recently asserted by the Prime Minister, is still yet to find confirmation in the data.

“The Bank of England’s Monetary Policy Committee is next due to meet on the 9 May. The weakness of February’s GDP figures will give them food for thought as they seek to determine the future course of UK interest rates. Based on today’s figures, the case for cutting Base Rate sooner rather than later is a relatively strong one.”

David Bharier Head of Research at the British Chambers of Commerce said “Today’s data confirms once again that the UK economy is stuck on a low-growth treadmill. With GDP growth of 0.2% in the three months to February, and 0.1% on a monthly basis – there’s little sign of the landscape changing soon. However, it may indicate that the technical recession ended at the end of last year.

“Boosting business investment is fundamental to securing stronger economic growth. While business confidence remains buoyant, our latest Quarterly Economic Survey published yesterday showed continued tough business conditions with most SMEs not increasing their investment.

“Firms are still facing significant cost pressures from historically high inflation and interest rates, skills shortages, and even more trade barriers with EU. Businesses desperately need a long-term economic plan that drives investment and innovation.”

Ben Jones, CBI Lead Economist, said “With the damp and dismal weather hitting retail and other sectors, it’s not surprising to see activity was broadly flat in February. But lower inflation is easing pressure on household incomes and spending, and the economy still seems to be on course to exit its mild recession in the first quarter.

“While growth was probably fairly modest over the first quarter, the outlook is improving with our business surveys showing growth expectations for the second quarter at their strongest for almost two years.

“But we need to get some momentum going in the economy without undoing hard work to bring down inflation. In this General Election year, it’s crucial parties of all stripes focus on structural challenges facing economy – like poor productivity and labour market pressure.

“What firms across all regions, nations and sectors tell us they need to drive sustainable growth, is stability and a long-term economic vision – which in turn will deliver prosperity to businesses and households alike.”

William Bain, Head of Trade Policy at the British Chambers of Commerce, said “It is difficult to draw concrete conclusions from a single month’s data, but there are signs of a nascent improvement in import and export volumes as global demand slowly recovers.

“The Office for Budget Responsibility’s recent analysis also indicated we should see a modest improvement in net trade this year. But data for the last three months of UK trade, overall, remains challenging.

“Geopolitical factors also continue to cloud the picture for global trade and could well weaken projected growth in the coming 18 months.

“Further measures are required by policymakers to nurture the green shoots we are seeing. The UK needs to ensure the Exports Strategy is delivering where it needs to, particularly around digital trade and across a wider range of UK economic sectors.

“The Government’s new Critical Imports Council needs to focus on improving supply chain security and diversification with business and industry.

“Today’s data also illustrates the need to keep trade costs as low as possible. This is major concern for British traders given imminent new border charges on certain food and plant imports from the EU, and increasing regulatory compliance burdens on cross-border trade.”

Suren Thiru, Economics Director at ICAEW, said “February’s uptick in GDP suggests that the UK economy is gaining some momentum from the boost to people’s incomes and confidence from falling inflation.

“It’s a racing certainty that the UK exited recession in the first quarter with output likely to have picked up further in March, particularly with the earlier Easter holiday lifting activity in key sectors, including retail.

“While recession concerns are disappearing into the rear-view mirror, the longer-term outlook is still difficult, with the lagged impact of earlier interest rate hikes and chronic supply side constraints likely to continue limiting the UK’s growth potential.

“This GDP increase may give those rate setters still concerned about persistent price pressures sufficient reassurance on the economy to keep interest rates higher for longer than many expect.”