Risk of recession in Britain rising
GDP growth slows in the first quarter
Britain’s economy shrank in March on fallout from soaring inflation, increasing the prospect of the country falling into recession.
Official first-quarter data yesterday showed that following solid output in January, the UK economy posted zero growth the following month and contracted by 0.1% in March.
It comes after the Bank of England (BoE) last week warned that Britain risks falling into recession with UK inflation expected to top 10%, a four-decade high, by the end of the year.
Consumer prices are surging worldwide on supply strains as economies reopen from pandemic lockdowns — and in the wake of the Ukraine war that is aggravating already high energy costs.
Britain’s economy grew 0.8% overall in the January-March period, the slowest quarterly growth for a year, the Office for National Statistics (ONS) said in a statement.
It compared with an expansion of 1.3% in the fourth quarter of last year.
Responding to the data, Chancellor of the Exchequer Rishi Sunak said economic recovery from the pandemic was “being disrupted by (Russian President Vladimir) Putin’s barbaric invasion of Ukraine and other global challenges”.
Sunak, however, added in a statement that growth in the first few months of the year was strong, faster than in the United States, Germany and Italy.
The economy grew for a fourth quarter in a row, and is above prepandemic levels.
Prime Minister Boris Johnson said he expected British growth to return very strongly in the next couple of years.
In an interview with LBC radio, he also refused to rule out a windfall tax on energy companies as surging oil and gas prices hit households hard.
“We’ll have to look at it,” said Johnson despite repeating his displeasure at such a levy.
“I don’t like them ... I don’t think they’re the right way forward,” he said, adding that a windfall tax on the likes of BP and Shell would deter them from investing in greener energy.
Johnson’s comments came one week after his Conservative Party lost control of key councils in local elections — an outcome blamed in part on the cost-of-living crisis.
Darren Morgan, director of economic statistics at the ONS, said declining output in the services and production sectors resulted in overall growth contracting in March.
“The risk of recession has just risen,” said Paul Dales, chief UK economist at Capital Economics. “The GDP figures suggest the economy had less momentum than we thought even before the full hit from the cost-of-living crisis has been felt.
“Strong price pressures will probably mean the BoE will raise interest rates further.”
The BoE last week raised its main interest rate by a quarter point to 1% to tackle runaway UK inflation.