The spectre of recession returned today after official figures revealed the British economy failed to grow at all in February.
The zero growth in GDP during the month was below forecasts of a 0.1 per cent expansion and means the UK remains stuck in a stagflation rut with inflation still running in double digits. The latest data from the Office for National Statistics showed that once again the wave of strikes over the winter hobbled economic growth with walkouts by teachers and civil servant contributing to the disappointing GDP figure for February.
The dominant services sector recorded a 0.1 per cent fall in output in the month with education the largest contributor after seeing a 1.7 per cent decline in a month scarred by teacher strikes.
Public administration was the second largest contributor, falling by 1.1 per cent because of civil service strikes. Today City economists are once again warning that a mild recession may be unavoidable this year as higher interest rates and food bills bite into household budgets.
Thomas Pugh, economist at consulting firm RSM UK, said: “Looking ahead, growth is likely to bumpy. Bad weather and continued strikes will weigh on GDP in March making it likely that GDP will fall in the first quarter overall, keeping the risk of recession alive.”
Recession is defined as two consecutive quarters of negative growth.
Chancellor Jeremy Hunt put a more positive light on the figures. He said: “The economic outlook is looking brighter than expected — GDP grew in the three months to February and we are set to avoid recession thanks to the steps we have taken through a massive package of cost of living support for families and radical reforms to boost the jobs market and business investment.”
But his Labour shadow Rachel Reeves said: “Despite our enormous promise and potential as a country, Britain is still lagging behind on the global stage with growth on the floor. The reality of growth inching along is families worse off, high streets in decline and a weaker economy that leaves us vulnerable.”
The GDP numbers came as Britain’s biggest retailer Tesco revealed how it had been hit by the cost of living crisis as profits halved from £2 billion to £1 billion in what it said had been “an incredibly tough year” for shoppers.
February’s flatlining follows growth of 0.4 per cent in January, revised up from growth of 0.3 per cent previously.
The Office for National Statistics said GDP grew by 0.1 per cent over the three months to February 2023.The 0.1 per cent fall in the services sector follows growth of 0.7 per cent in January 2023, revised up from 0.5 per cent.
Muniya Barua, deputy chief executive at London business group BusinessLDN, said: “This data suggests that a recession could be back on the table as the impact of the cost of living crisis hits households and businesses.
With the IMF signalling that the UK is set to be the worst-performing economy in the G20 in 2023, it is vital that the Government acts now to prevent our economy from flatlining.
“Several low-cost measures could provide an immediate boost, including reforming the apprenticeship levy to encourage greater take-up, and further devolution of regional pots of Government funding so spending can be targeted where needed locally.”
This comes after the US Federal Reserve warned last night that the fallout from the banking crisis could tip its economy into a mild recession this year.
Tesco bosses said the supermarket giant had come under pressure from rising prices as its customers also struggled under soaring inflation.
“It’s been an incredibly tough year for many of our customers, and we have been determined to do everything we can to help,” said chief executive Ken Murphy.
“Our results reflect our continued investment in delivering great value and quality for our customers, whilst at the same time looking after our colleagues. This is despite unprecedented levels of inflation in the prices we have paid our suppliers for their products, and the cost of running our own operations.”
But despite problems, Tesco said it had delivered a “market-leading performance” over the Christmas period.
Data from Kantar released in January showed that while Tesco had the largest market share of any supermarket in the UK, it was not the fastest-growing traditional grocer.
Asda’s sales grew quicker over Christmas while non-traditional grocers grew even faster.
