GDP falls 0.1% as UK economy shrinks between April and June
If there is more financial help on the way, it can't come soon enough for families and companies who are having to make every penny count - Sarah Corker reports
The UK’s economy contracted in the last three months, official figures show, further stoking fears that a recession might be around the corner. Gross domestic product (GDP) fell by 0.1% during the three months to the end of June, the Office for National Statistics (ONS) said. It is a big step down from the first quarter of the year, when GDP rose 0.8%. The service sector was particularly badly hit, falling by 0.4% over the quarter, ONS experts said.
A large part of this was in health and social work, and came as less money was spent on the fight against Covid-19.
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GDP fell 0.6% in June, and the ONS revised its May estimate from growth of 0.5% to just 0.4%. ONS director of economic statistics Darren Morgan said: “With May’s growth revised down a little and June showing a notable fall, overall the economy shrank slightly in the second quarter. “Health was the biggest reason the economy contracted as both the test and trace and vaccine programmes were wound down, while many retailers also had a tough quarter. “These were partially offset by growth in hotels, bars, hairdressers and outdoor events across the quarter, partly as a result of people celebrating the Platinum Jubilee.” The Bank of England (BoE) has warned that the UK might enter recession later this year, and this could be the longest downturn since 2008.
As ITV News Business and Economics Editor Joel Hills notes, the BoE forecasts a recession - a period of temporary economic decline during which trade and industrial activity are reduced - won’t begin until the winter.
Tory leadership contender Liz Truss, who has pledged to scrap April's National Insurance rise, has said lowering taxes is the best way to avoid a recession.
But Joel Hills wrote: "It is hard to see how tax cuts of the sort Liz Truss proposes can avoid a downturn of the scale the Bank envisages."
With energy bills rising, ITV News Business and Economics Editor Joel Hills asks Chancellor Nadhim Zahawi what the government is doing to ease peoples' worries.
Last week, officials at the BoE warned that households will face a 15-month recession and inflation of more than 13% later this year. In response, it raised interest rates from 1.25% to 1.75%, the biggest increase for 27 years, in a move which will put further pressure on mortgage holders.