Home Business UK economy flatlines in April in blow to Sunak

UK economy flatlines in April in blow to Sunak

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Labour and the Liberal Democrats seize on the latest official growth figures as more proof that the Conservatives have crashed the economy though the report says momentum was lost due to the wettest April for 12 years.
Business reporter
Wednesday 12 June 2024 11:54, UK
The UK economy flatlined in April, according to official figures that have been seized on by the government’s critics as evidence the Conservatives’ heralded plan is not working.
The Office for National Statistics (ONS) said there was zero growth in April compared to the 0.4% figure recorded during March.
A Reuters news agency poll of economists had predicted the 0% performance given earlier evidence that wet weather had knocked retail sales and construction output particularly hard.
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The GDP (gross domestic product) report from the ONS – the last to be released ahead of the election – showed UK overall rainfall at 155% of the long-term average in April.
Construction output was found to have declined by 1.4% as a result, the number crunchers said, also aided by poor demand for construction products in the manufacturing sector.
Production was down by 0.9% while the services sector – accounting for almost 80% of UK total output – grew by just 0.2%.
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Despite the emphasis on the hit from rain, the numbers still represent a setback for Prime Minister Rishi Sunak’s key election argument that the economy is improving after successive hits from the COVID pandemic followed by the cost of living crisis.
The UK exited a short-lived recession at the end of 2023 when growth of 0.6% was registered in the first quarter of the current year.
While economists continue to see growth in the three months to June, expectations are for growth of around 0.3% – half the rate achieved between January and March.
Ahead of polling day on 4 July, there will be a final set of inflation figures followed, the next day, by a Bank of England interest rate decision.
Financial markets and economists see little chance of a rate cut on 20 June, largely because wages are growing at a pace that risks stoking price growth further after significant progress in the battle against inflation.
The consumer prices index measure currently stands at 2.3% and is expected to ease further when the figures for May are released.
Chancellor Jeremy Hunt said: „There is more to do, but the economy is turning a corner and inflation is back down to normal.”
He added that the Conservatives would „keep the economy growing with our clear plan to cut taxes on work, homes and pensions”.
But shadow chancellor Rachel Reeves said of the ONS data: „Rishi Sunak claims we have turned a corner, but the economy has stalled and there is no growth.
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„These figures expose the damage done after 14 years of Conservative chaos.
„We are now in the third week of this general election campaign and in that time the Labour Party has set out its plan to grow the economy by bringing back stability, unlocking private sector investment and reforming our planning system.
„All the Conservatives are offering is more of the same, with a desperate wish list of unfunded spending promises that will mean £4,800 more on people’s mortgages. Rishi Sunak’s plan is a recipe for five more years of Tory chaos.”
Liberal Democrat Treasury spokeswoman Sarah Olney said the lack of growth in April showed the Tories had „utterly failed” to deliver on their promises.
„As Rishi Sunak’s time as prime minister peters out, so does the UK’s economic growth,” she said.
„The Conservatives have utterly failed to deliver the growth they repeatedly promised, instead presiding over stagnation and economic misery for hardworking families across the country.
„The Conservatives’ manifesto shows they simply lack the ambition and vision to get the economy moving again.
„It’s clear for voters across the country that the only way to make it happen is to vote them out of office on July 4.”
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Yael Selfin, chief economist at KPMG UK, said of the outlook: „Forward-looking indicators point to renewed momentum in activity over the coming months, supported by an improvement in consumer sentiment as pay growth remains strong.
„The early summer general election could help resolve political uncertainties which could provide a boost for business investment.
„Nonetheless, whichever party wins the election will have to contend with a number of supply-side challenges which will constrain the UK’s long-term growth potential.
„We expect economic activity to remain sluggish in historical terms this year with growth at just 0.5%.”

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