Business leaders are calling for more support for the economy as the risk of recession increases.
The Confederation of British Industry today urged the Chancellor to revise the rules to encourage more business investment, after data showed the economy was stagnant even before Russia invaded Ukraine.
GDP rose just 0.1% in February, according to data from the Office for National Statistics. That was down from 0.8% in January and below the 0.2% the city expected.
Alpesh Paleja, senior economist at the Confederation of British Industry, said: “It is clear that the growth momentum remains disappointing. Although the government has taken some steps to maintain confidence in our economy in the Spring Statement, it is not doing enough to address the current challenges facing businesses.
The CBI has called for more capital allowances and R&D reform to encourage investment, as well as apprenticeship tax reform.
ONS data showed manufacturing suffered an unexpected fall in February, contracting 0.4% as supply chain problems hit production in the car and IT sectors .
Worryingly, the data covers a period before the invasion of Ukraine on February 24. Inflation has soared since then and supply chains have been further squeezed by sanctions and disruptions. headwinds from high energy prices as it consumes above average energy per unit of GDP and we will see this reflected in future data releases.
Some in the city are now warning of the risk of a recession later this year. Thomas Pugh, economist at RSM UK, said Britain’s economy is expected to grow 1% in the first quarter, but just 0.1% in each period thereafter.
“While we don’t currently expect a recession, it wouldn’t take much of a rise in oil prices or disruption to supply chains to push the UK into a recession,” he said.
Last week, Deutsche Bank said the risk of recession was increasing.
Chancellor Rishi Sunak said: “Russia’s invasion of Ukraine is creating additional economic uncertainty here in the UK, but it is right that we react strongly against Putin’s unprovoked invasion.
“We are supporting families with the cost of living with £22bn of support this financial year, and building a high productivity, low tax economy, including through a tax cut of up to £1,000 for a half a million small businesses.”
While manufacturing weighed on the economy, a rebound in travel helped offset some of the weakness. Tour operator activity jumped by a third and hotel bookings increased by 23%.
The economy is now 1.5% larger than it was before the pandemic began.