UK economy contracted by 0.3% in April

The figures, published by the Office of National Statistics, come after a decline of 0.1% in March. In addition to this, the services, production and construction sectors all saw a decline in GDP - going down 0.3%, 0.6% and 0.4% respectively - making it the first time all the main sectors saw GDP drops since January 2021. 

However, output in consumer-facing services grew by 2.6% in April - following a fall of 1.8% in March. This increase was driven by a 7.6% growth in other personal service activities - with particular strength from the hairdressing and grooming industry.

Furthermore, retail trade grew by 1.4% in the month to April driven by growth in food stores. 

The GDP of consumer-facing services remained 4.4% below their pre-Covid levels in April 2022, driven by a 3.1% drop in the buying, selling, renting and operating of owned or leased real estate market.

Overall GDP was at 100.7 percentage points in April 2022 - its lowest figure since December 2021 - however this is 0.9% higher than the 99.8 percentage point figure recorded before the pandemic in February 2020. 

Responding to the latest figures, Chancellor Rishi Sunak said: “Countries around the world are seeing slowing growth, and the UK is not immune from these challenges. I want to reassure people, we’re fully focused on growing the economy to address the cost of living in the longer term, while supporting families and businesses with the immediate pressures they’re facing.” 

Shadow chancellor Rachel Reeves, meanwhile, said: “These figures will add to the worry families are still feeling about their own finances and the long-term health of our economy.” 

Off the back of these figures, the Confederation of British Industry (CBI) downgraded its GDP growth outlook “significantly”, from 5.1% to 3.7% in 2022, and from three percent to one percent in 2023.  

High inflation is the primary source of weaker growth, as it expects this to remain high into the Autumn, rising to another peak of 8.7% in October given a likely rise in Ofgem’s energy price cap.

The result is a historic squeeze in household incomes, which will lower consumer spending. This in turn will weaken GDP growth towards the end of this year and into the first half of next year. 

Commenting on this, the CBI’s director-general Tony Danker said: “Let me be clear - we’re expecting the economy to be pretty much stagnant. It won’t take much to tip us into a recession.

“And even if we don’t, it will feel like one for too many people. Times are tough for businesses dealing with rising costs, and for people on lower incomes concerned about paying bills and putting food on the table.

“It’s as clear as day that business investment is one of the few bright spots left in our economy. The super deduction is one of the only reasons we have staved off the threat of recession for now - there must be a permanent successor.

“We’ve had weeks of politicking with the country standing on the brink of a summer of gridlock. There is only a small window until recess. 

“In-action this summer would set in stone a stagnant economy in 2023, with recession a very live concern. We need to act now to install confidence. 

“This can wait no longer.”