The latest data from the Office for National Statistics (ONS) has revealed that the UK’s GDP growth remained flat between March and April, showing no month-on-month growth following a 0.4% rise in March. This stagnation comes despite modest growth in the services sector, which accounts for almost 80% of the UK economy, and highlights weaknesses in both production and construction.
Breakdown of the Data
In April, the services sector experienced a slight increase of 0.2% month-on-month, providing a glimmer of hope amidst the overall stagnation. However, this was offset by declines in other areas:
- Construction output fell by 1.4%, marking the third consecutive month of decline.
- Production saw a decrease of 0.9%.
These figures indicate that while some parts of the economy are slowly improving, significant challenges remain, particularly in construction and production.
Context and Economic Outlook
The flat growth in April follows a period of robust economic performance in the first quarter of the year, when the UK recorded its fastest growth in two years, helping to exit the recession that hit in the latter half of last year. Despite this strong start, the latest figures show that the recovery is fragile and uneven.
One positive note is the annual wage growth of 6% for the three months leading up to April. However, this increase in wages is likely to delay any potential interest rate cuts until after the summer, according to analysts from The Times.
Industry Reactions
Martin McTague, National Chair of the Federation of Small Businesses (FSB), expressed disappointment over the stagnant growth, especially following the promising performance in the first quarter. He emphasized the need for political parties to present clear plans for achieving sustained economic growth:
“Today’s flat growth in GDP shows the economy is not yet delivering the conditions that small businesses need to flourish. Coming off the back of solid growth in the first quarter, it is especially disappointing.”
McTague highlighted the importance of supporting small businesses, which are crucial for innovation and job creation. He called for a Small Housebuilder Strategy to boost construction output and proposed several measures to alleviate pressures on small firms, such as raising the Employment Allowance and enacting a Small Business Act.
Ben Jones, Lead Economist at the Confederation of British Industry (CBI), pointed to external factors like the wet April weather and ongoing inflation pressures as contributors to the flat growth. However, he remained optimistic about the future, noting that lower inflation and rising real incomes could boost consumer spending in the coming months:
“Consumers and firms alike are going to start to feel the benefit of lower inflation, which in turn should boost confidence and support spending as we head into a summer packed with major entertainment and sports events.”
Jones also stressed the need for a comprehensive strategy to address productivity issues, including support for automation and AI investments, and policies on tax, planning, and skills development.
James Smith, Research Director at the Resolution Foundation, underscored the broader implications of the stagnant growth, warning that it reflects deeper structural challenges in the UK economy:
“The latest data offers a snapshot of Britain’s wider growth challenge, and should remind politicians that ending stagnation should be the central task of whoever wins the next election.”
Looking Ahead
The mixed economic signals from the latest GDP data indicate that while some sectors are beginning to recover, others continue to struggle. The upcoming election presents an opportunity for political leaders to outline their visions for sustainable economic growth and support for key industries. Ensuring a balanced and inclusive recovery will be critical for maintaining the momentum needed to overcome the challenges highlighted by the latest ONS data.
The focus now shifts to how the next government will address these issues and implement policies that foster a resilient and dynamic economy capable of sustained growth.
