Recession warning: Fears for crash after sudden plunge in growth – ‘Risk has risen’
Victoria Atkins MP defends Lee Anderson's foodbank comments
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According to the Office of National Statistics (ONS) the UK economy shrank by 0.1 percent in March. Chancellor of the Exchequer, Rishi Sunak blamed the war in Ukraine for increasing cost of living problems which have put the UK on the verge of a recession. He said: “The UK economy recovered quickly from the worst of the pandemic and our growth in the first few months of the year was strong, faster than the US, Germany and Italy, but I know these are still anxious times. Our recovery is being disrupted by Putin’s barbaric invasion of Ukraine and other global challenges but we are continuing to help people where we can.”
He went on: “Growth is the best way to help families in the longer-term so as well as easing immediate pressures on households and businesses, we are investing in capital, people and ideas to boost living standards in the future.”
The news will increase pressure on the Chancellor to start to cut taxes in a bid to get people in the UK to spend more.
Darren Morgan from the ONS warned that the figures showed that the cost of living crisis is “really beginning to bite”.
Mr Morgan warned that the figures underlined trading in the retail sector had fallen “well below expectations” in March and people cutting spending on “big ticket, non-essential items”.
A second set set of figures showing the economy shrinking will mean the UK is officially in recession with the crisis having echoes of the impact of the collapse of the banks in 2008.
“The other industry we saw very much struggling is the motor trade industry. They are really struggling at the moment,” he said.
The cost of living crisis is the biggest problem faced by Boris Johnson’s Government and he has come under pressure to replace Mr Sunak as Chancellor and scrap the National Insurance rise to pay for the backlog in NHS care caused by the pandemic.
Mr Morgan noted that a survey by the ONS of 40,000 businesses revealed that more than half had seen an increase in the price of wholesale materials and goods, but fewer than half of those firms were passing the costs on.
“They are absorbing those rises and you do have to question how sustainable that is on an ongoing basis,” he said.
Many businesses expect the price of goods to increase further, and “their big concern is the energy prices,” Mr Morgan added.
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Labour’s Lisa Nandy, shadow secretary of state for Levelling Up, criticised the government for “very sluggish” rates of growth in the British economy.
“Businesses are struggling, shops are boarded up, people simply don’t have money to spend,” she told the BBC this morning.
The CBI also warned that families are not spending because people are feeling the pinch.
“The economy barely kept its head above the water during a volatile start to the year, but times look set to get that bit tougher,” said Rain Newton-Smith, CBI chief economist.
A fall of 15.1 percent in motor vehicle repairs was the biggest contributor to the downturn in the economy.
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