UK economy shrinks by 0.3%

Figures from the Office for National Statistics released this morning (June 13) show gross domestic product fell 0.3 per cent in April, the second month of decline after March saw a 0.1 per cent fall.

The ONS said the main contributor was the “significant reduction” in the NHS’s test and trace programme, as well as a 1 per cent fall in manufacturing as businesses struggle with price increase and supply chain shortages.

Things are unfortunately going to get worse before they get betterPaul Craig, Quilter Investors

Construction levels also fell 0.4 per cent in the month, which follows a 1.7 per cent growth in February that the ONS said was partially due to the “significant” repair and maintenance activity after a series of storms in the second half of the month.

Chancellor of the Exchequer, Rishi Sunak, said the slowing growth has been seen worldwide.

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

Portfolio manager at Quilter Investors, Paul Craig, said while a recession is still a while away, it is “looming” on the horizon.

“With sterling sitting where it is just now things are unfortunately going to get worse before they get better. 

“Just as with the pandemic response two years ago, fiscal and monetary policy is going to have to work hand in hand.”

At its monetary policy meeting on Thursday, the Bank of England is expected to raise interest rates to tackle soaring inflation.

Craig said: “As the BoE has pointed out in the past, much of this inflation is out of its control and as such it is going to be an incredibly difficult task to guide the economy through this volatile and uncertain period.”

sally.hickey@ft.com