Commenting on the latest ONS UK GDP figures, published today, Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said:
“Markedly slower growth confirms an alarming loss of momentum for the UK economy in the first quarter, from a strong January outturn to a decline in output in March as surging inflation increasingly weighed on activity.
“The services sector was a key driver of GDP growth in the quarter, as the release of pent-up customer demand after Plan B restrictions expired and declining concerns over Omicron, boosted activity within hospitality and tourism. In contrast, health sector output fell as NHS Test and Trace and the COVID vaccination programmes reduced activity.
“The decline in business investment is further confirmation that it remains a weak point for the UK economy, limiting innovation and productivity, stifling the UK’s growth prospects.
“The first quarter slowdown is likely to be followed by a mild contraction in economic output in the second quarter as surging inflation, soaring energy bills and higher taxes suffocates economic output by suppressing consumer spending and business investment.
“Declining health sector output following the scrapping of free Covid testing in April and the extra bank holiday in June are also likely to drag on second quarter UK GDP.
“Against this backdrop, the Bank of England’s recent decision to raise interest rates continues to look like a misstep.
“An emergency budget is urgently needed to give firms the breathing space they need to raise productivity and strengthen the economy, including reversing the recently introduced National Insurance increase until at least the next financial year.”
More information on the latest ONS GDP data can be found here.