UK economy stalls in blow to Rishi Sunak

UK economic growth stalled in April in a blow to Prime Minister Rishi Sunak as he attempts to reboot a faltering election campaign.

According to data published by the Office for National Statistics on Wednesday, the zero growth figure for the month compared with a 0.4 per cent expansion in March.

It also marked a sharp slowdown from the 0.6 per cent growth for the first quarter, which ended last year’s technical recession.

However GDP was 0.7 per cent higher in the three months to April compared with the previous three-month period.

The latest monthly figure, which matched forecasts from economists polled by Reuters, came as the wettest April for more than a decade hit the services sector and construction.

In his campaign appearances ahead of the snap election, Sunak has frequently pointed to Britain’s first-quarter growth as a sign of the country’s economic strength.

The prime minister has cited comments from the ONS chief economist that the expansion during that period showed the UK economy was “going gangbusters”. The statistics agency later clarified the phrase was not intended as a comment about the overall state of the economy.

The Conservatives remain about 20 percentage points behind the opposition Labour party in opinion polls.

Responding to the ONS data, the Conservative party said it showed there was “more to do, but the economy is turning a corner and inflation is back to normal”.

However, shadow chancellor Rachel Reeves said: “Rishi Sunak claims we’ve turned a corner, but the economy has stalled and there is no growth.”

Sharon Graham, general secretary of Unite the union, said the figures had shown “once again . . . how far away we are from the kind of high economic growth that politicians keep promising is over the next hill”.

Paul Dales, chief UK economist at consultancy Capital Economics, said April’s stagnation “doesn’t mean the economic recovery has been extinguished, but it’s hardly great news for the prime minister”.

But he and other economists said output was still likely to grow over the second quarter as a whole, as strong wage growth, lower inflation and drier weather helped consumption bounce back.

This could “generate a bit of an economic tailwind for the next government”, Dales said.

The figures showed that services output grew by a healthy 0.9 per cent over the three months to April, boosted by strength in the tech sector, scientific research and development and advertising.

But the pace of growth slowed abruptly in April as wet weather stopped consumers spending in shops and restaurants. The weather also disrupted building sites, with construction output falling 1.4 per cent on the month.

Manufacturing output fell by 1.4 per cent between March and April, dragged down by a fall in pharmaceutical manufacturing, which had risen sharply in a one-off spurt the previous month.

Sterling was unchanged against the dollar at $1.274 after the data release. Investors expect the first Bank of England interest rate cut by November, and a second quarter-point reduction by March next year.

Luke Bartholomew, economist at asset manager Abrdn, said the broader picture was still one of “a solid recovery from last year’s recession”.

He added that the latest data would not change the outlook for interest rates, with a June cut in rates by the BoE “very unlikely but a move in August still on the cards”.

Suren Thiru, economics director at the ICAEW accountancy body, also said April’s “stumble” was likely to prove the “low point”, with lower inflation set to boost real incomes and the Euro 2024 football tournament set to lift consumer activity.

But Thiru added that the longer-term outlook would depend on how far the winner of the election tackled “long-standing structural issues”.