UK financial development slowed by greater than anticipated in February as a droop in automobile manufacturing undermined a pointy restoration in vacation bookings after the easing of Covid journey restrictions.
The Workplace for Nationwide Statistics stated gross home product rose by solely 0.1% in February, down from a month-to-month development fee of 0.8% in January when the financial system was recovering from the coronavirus Omicron variant.
Metropolis economists had forecast a month-to-month development fee of 0.3%. General, the financial system was 1.5% greater in February than its pre-pandemic stage .
Elevating questions over the energy of the financial system earlier than Russia’s invasion of Ukraine in late February, manufacturing slumped as automobile producers continued to battle with sourcing elements amid international provide chain disruption and shortages of important elements.
Exercise within the sector fell 0.4% on the month, pushed by a 5.4% drop within the manufacture of transport gear and a 4.3% fall in laptop, digital and optical merchandise, the place disruption to the provision of microchips has hit manufacturing volumes all over the world.
Tourism rose strongly after the easing of pandemic restrictions led to a rise in folks reserving holidays within the UK and abroad, with development of 33.1% for journey companies and tour operators. The lodging sector, which incorporates resorts, recorded a 23% rise in exercise as extra folks travelled inside the UK, contributing to the primary month of optimistic development for resorts and tenting grounds since August.
Nevertheless, development within the companies sector of the financial system slowed amid a drop within the well being sector, largely reflecting a fall-back from excessive ranges within the NHS test-and-trace and vaccination programmes in December and January when Omicron was at its peak.
The most recent snapshot comes as enterprise leaders and economists warn that Britain will most likely battle for development within the coming months as hovering vitality payments and the rising value of the weekly store drags down client spending energy.
“The information that the financial system was hardly rising in any respect in February suggests the financial system had rather less momentum within the first quarter than we had beforehand thought,” stated Ruth Gregory, senior UK economist on the consultancy Capital Economics. “[It] will increase the danger of a contraction in GDP within the coming months because the squeeze on family actual incomes intensifies.”
Thomas Pugh, an economist on the accountancy agency RSM UK, stated February will be the final month of development for some time. “Surging gas costs, slumping enterprise and client confidence and provide chain disruptions will begin to be felt from March and can actually kick into gear in April when client vitality costs rose by 54%,” he stated.
Some companies stated disruption from the storms Dudley, Eunice and Franklin throughout the month had hindered commerce, together with within the constructing trade, eating places and takeaways, hairdressing and sweetness, and leisure parks and vacation centres. Some firms reported a optimistic affect, corresponding to these in fencing, torch gross sales and non permanent off-grid energy.
Reflecting the hit to the constructing trade as websites had been compelled to shut and cranes turned idle amid the disruption, output within the development sector fell by 0.1% on the month.
Suren Thiru, the top of economics on the British Chambers of Commerce, stated the federal government wanted to supply extra monetary help to firms and companies to take care of rising value pressures.
“February’s slowdown is more likely to be the beginning of a protracted interval of significantly weaker development as rising inflation, surging vitality payments and better taxes more and more damages key drivers of UK output, together with client spending and enterprise funding,” he stated.
It comes amid rising strain on the chancellor, Rishi Sunak, over his spouse’s tax affairs and criticism for his spring assertion final month over a scarcity of motion to assist these most in want throughout the price of dwelling emergency.
Sunak admitted the financial system confronted uncertainty, though he argued that £22bn of help for the elevated value of dwelling was being made obtainable to households this 12 months, in addition to tax cuts price £1,000 for half one million small companies.
“Russia’s invasion of Ukraine is creating further financial uncertainty right here within the UK, however it’s proper that we’re responding robustly towards Putin’s unprovoked invasion,” he stated.