Gross domestic product fell 0.3% in April, official figures showed yesterday – although experts had forecast a rise of 0.1%. The fall in GDP comes amid millions of families struggling with skyrocketing energy and fuel bills as daily costs soar – with inflation hitting 9%.
The Confederation of British Industry, the country’s main business group, warns that households are facing the greatest pressure since the 1950s and says the UK is on the brink of recession.
But the Chancellor said countries around the world were experiencing slowing growth and the UK was “not immune to these challenges”.
Mr Sunak added: “I want to reassure people that we are fully focused on growing the economy to meet the longer term cost of living while supporting families and businesses in the face of the immediate pressures they face.”
Boris Johnson has blamed a global inflationary ‘hump’ – but he risked inflaming Tory tensions by hinting that further tax cuts to help tackle the crisis are unlikely to come until next year.
The prime minister suggested in a radio interview that people will have to wait until inflation starts to come down, which is unlikely to happen until next year.
He added: “We are bringing in tax cuts as fast as we can, but what we also need to do is take care of people in difficult times.
“There’s a spike in inflation that we have to get through, taking care of people while we get through this, and that’s what we’re going to do.”
The grim numbers could persuade the Bank of England to halt ahead of a 0.5 percentage point hike in interest rates this week, with 0.25 points now looking more likely to avoid further stifling growth.
The CBI is calling for “vital action” in the coming months to boost business confidence.
Figures from the Office for National Statistics showed GDP, a measure of the size of the economy, fell in April, with the three main sectors – raw materials, manufacturing and services – suffering lower output for the first time since January of last year. .
The monthly decline in GDP in April was also the biggest contraction in 15 months and follows a 0.1% plunge in March.
The ONS said it was the first drop in GDP for two consecutive months since March and April 2020, when the pandemic brought down the economy.
Samuel Tombs of the Pantheon Macroeconomics research group predicts that the economy will contract globally between April and June.
But he said: “A recession – two quarters of negative growth – remains unlikely.
“Real household disposable income is set to rise in Q3 and Q4 now that the Chancellor has announced an additional £15bn of grants in those quarters.”