UK economy stagnates with no growth in February as strikes hit productivity

The lack of growth was unexpected – 0.1% had been expected.

By Sarah Taaffe-Maguire, economic journalist @taaffems

Thursday, April 13, 2023 7:47 a.m., United Kingdom

The British economy stagnated in February, with no GDP growth, according to official figures.

Civil service strikes and low energy consumption offset growth in areas such as construction – which rose by 2.4%, according to data from the Office for National Statistics (ONS).

The flatlining was unexpected. Economists polled by the Reuters news agency had forecast a slight growth of 0.1% for the month.

ONS figures showed services output fell 0.1% in the month, following growth of 0.7% in January 2023.

The main contributor to the negative growth in the services sector was education, which fell 1.7% in a month when teachers strike took place.

Another sector affected by the strikes, public administration, was the second largest contributor to the negative growth in the services sector.

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The construction has developed thanks to the ongoing repair works and retail production increased as many stores had a “dynamic month”, said ONS director of economic statistics Darren Morgan.

Unusually warm and dry weather led to a reduction in electricity and gas production, Mr Morgan added. Output from the arts, entertainment and recreation industries increased, however.

He followed 0.4% growth in January and confirmation of the British economy recession averted in the second half of 2022 and actually increased by 0.1% in the last three months of the year.

According to the most recent projections from the independent economic forecaster, the Office for Budget Responsibility (OBR), the UK will avoid recession – defined as two consecutive quarters of negative growth – in 2023, despite previous predictions.

But the economy will continue to contract overall this year by an expected 0.2%, and the fiscal watchdog has warned the standard of living is expected to fall the most since the start of the recordings.

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On a quarterly basis, the economy grew slightly. In the three months to February, the ONS said GDP, a measure of economic growth, rose by 0.1%.

Higher economic growth leads to increased tax revenues and likely higher incomes and living standards – typical goals of any government.

However, responding to the flatlining, Chancellor Jeremy Hunt remained bullish on the numbers.

He said: “The economic outlook looks brighter than expected – GDP grew in the three months to February and we are poised to stave off recession thanks to the measures we have taken through a massive support package at the cost of life for families and sweeping reforms to stimulate the labor market and business investment.

But Labour’s shadow chancellor Rachel Reeves has criticized the government’s record on economic growth.

She said: “Despite our huge promise and potential as a country, Britain is still lagging behind on the world stage with growth on the ground.

“The reality of growth ahead is worse off for families, shrinking shopping streets and a weaker economy that leaves us vulnerable to shocks.

“These results are exactly why Labour’s mission to deliver the highest sustained growth in the G7 is so important – it’s that level of ambition we need to strengthen our economy, make our high streets and improve the lot of families in all parts of Britain.”

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