United Kingdom: the British economy stagnates in the first quarter

No recession yet. This is the conclusion that we can draw from the results published this Friday by the National Statistics Office (ONS). The statistical institute thus reports a slight growth in British gross domestic product (GDP). This increased by 0.1% in the first quarter, after an increase of 0.1% also in the last quarter of 2022.

However, we should not declare victory too quickly, points out the ONS. The organization specifies that the economy contracted at the end of the quarter, by 0.3% for the month of March alone after having stagnated in February and progressed by 0.5% in January.

Growth in the first quarter “was driven by the IT and construction sectors, but the economy was slowed by wage strikes in health, education and public administration”, specifies on Twitter Darren Morgan, ONS Director of Economic Statistics. The country has, in fact, been experiencing repeated strike movements demanding wage increases for almost a year.

New strikes

“In March, the economy suffered from a decline in activity in the services sector, trade, logistics, distribution and retail,” comments Darren Morgan.

“A weaker economy in March highlights its fragility despite a fall in wholesale energy prices, improving supply chains and consumer confidence,” analyzes KPMG economist Yael Selfin.

This Friday and Saturday, British railway workers – drivers, repairers and controllers – are on strike again. The stated objective is to demand salary increases in the face of inflation which has exceeded 10% for months. For the moment, they reject the companies’ revaluation proposals, which they consider insufficient. This mobilization illustrates the fundamental social movement that has been shaking the United Kingdom for months, among nurses, ambulance drivers, public officials and other professions who have walked out on numerous occasions since the fall.

Sustainable inflation

Weighed down by inflation which remains above 10%, the British economy was indicated as being in recession this year, after having come close to it at the end of 2022. The latest forecasts from the Bank of England (BoE), published Thursday, show more optimism. Still far from its level before the Covid-19 crisis, British GDP was 0.5% lower in the first quarter than in the fourth quarter of 2019, just before the pandemic.

British Finance Minister Jeremy Hunt welcomed the quarterly growth figures as “good news” this Friday. In a press release, he said he wanted to focus on a “competitive” tax policy and resolve the labor and productivity problems that are penalizing the economy.

However, it is not clear that the British economy will recover in April, May and June. “The continuing strikes and the additional public holiday in May” for the coronation of King Charles III “should weigh on activity in the second quarter, to the point that a slight decline is plausible”, anticipates the economist from the EY firm , Martin Beck. This predicts “that the recovery will accelerate in the second half of 2023” with the hoped-for end of social movements, budgetary easing and the fall in inflation which “will help restore purchasing power to households”.

This article is originally published on latribune.fr

Beth Malcolm

Beth Malcolm is Scottish based Journalist at Heriot-Watt University studying French and British Sign Language. She is originally from the north west of England but is living in Edinburgh to complete her studies.