Slowdown fears mount as GDP unexpectedly shrinks in April

Britain’s economy unexpectedly shrank in April, official figures showed today (13), adding to fears of a sharp slowdown.

As per latest figures, gross domestic product contracted by 0.3 percent after falling by 0.1 percent in March, the first back-to-back declines since April and March 2020, at the start of the coronavirus pandemic.

Economists polled by Reuters had on average expected GDP to grow by 0.1 percent in April from March.

GDP would have expanded by 0.1 percent excluding the impact of a reduction in the government’s coronavirus test-and-trace and vaccination programmes, the Office for National Statistics said.

But it was the first time since January last year that all main economic sectors had shrunk.

Over the three months to April, GDP was up by 0.2 percent, weaker than the Reuters poll forecast of 0.4 percent and slowing sharply from growth of 0.8 percent in the three months to March.

Many firms said increases in the cost of production had affected their business, the ONS said.

Martin Beck, chief economic advisor to the EY ITEM Club- a forecasting group, said the data was a poor launchpad for the second quarter, which was at an increased risk of showing a small contraction across the three months.

“Growth outlook is poor. An already serious squeeze on households’ spending power will be negatively affected by the inflationary impact of global supply chain frictions and sterling’s recent weakness,” Beck said.

The figures come amid growing concern over the strength of the economy as prime minister Boris Johnson’s government continues to tackle internal divisions over the best way to respond to faltering growth and the rising cost of living.

Rishi Sunak, the chancellor, said the government had a plan to boost the economy and was supporting people with rising living costs.

“Countries around the world are seeing slowing growth, and the UK is not immune from these challenges,” he said.

Meanwhile, Rachel Reeves, the shadow chancellor, said, “These figures are extremely worrying and will add to the concern families are still feeling about their own finances and the long term health of our economy.

“Instead of properly addressing the structural weaknesses and insecurity they’ve created, all the Conservatives use are sticking plasters.”