Expert comment: latest UK GDP figures from the ONS

“The Office for National Statistics (ONS) recently released the Gross Domestic Product (GDP) figures for the UK in March 2023. The release follows the recent announcement of a further increase in the base interest rate (from 4.25% to 4.5%) by the Bank of England (BoE). The BoE has been more optimistic regarding economic growth in the UK and discarded any risk of recession.

“According to the latest ONS data, after showing no growth in February 2023, the Gross Domestic product (GDP) in the UK is estimated to have fallen by 0.3% in March 2023. Nevertheless, GDP grew by 0.1% in the three months to March 2023 thanks to a stronger performance in January. 

“To better understand the decrease in monthly GDP and its causes, it is useful to analyse it by sectors. According to the ONS, the major contributor to the fall was the services sector, with nine out of 14 sectors contracting. Namely, the main contributing sectors to the monthly fall in March 2023 were wholesale and retail trade; repair of motor vehicles and motorcycles (-0.14); information and communications (-0.08); plus administrative and support service activities (-0.08). Other sectors which declined, but by less, were transportation and storage (-0.07); professional scientific and technical activities (-0.04); accommodation and food services activities (-0.02); human health and social work activities (-0.02); as well as financial and insurance activities (-0.01). The contraction in these sectors has been only partly compensated by growth in arts, entertainment and recreation (0.02), real estate activities (0.02) and education (0.01).

“It would not be fair to simply attribute the GDP fall only to the strikes. The figures above clearly show that contraction occurred also in sectors not affected by strikes, but affected by lower purchasing power of consumers hit by high inflation and with less disposable income to spend, as well as by the lack of workforce.

“The data also confirms that the UK is the worst performing economy in the G7, struggling more than others to recover post-pandemic. This raises the question on the only factor that affects the UK but no other countries, and it is not Covid, supply chain disruptions, the war in Ukraine, or bad weather…”