© Reuters. People walk along Primrose Hill in London 04/17/2023. Photograph: Henry Nichols/ReutersWritten by William Schomberg and David Milliken
LONDON (Reuters) – Britain’s economy slumped in the first three months of 2023, but an unexpectedly sharp drop of 0.3% in March highlighted the fragility of its recovery.
Economists polled by Reuters had expected quarterly growth of 0.1% but expected output to be flat in the final month of the quarter.
“The decline in March was driven by across-the-board cuts in the services sector,” said Darren Morgan of the Office for National Statistics.
“…, auto sales were low by historical standards – continuing a trend seen since the start of the pandemic – as inventories, distribution and retail also had a bad month.”
The UK economy remained 0.5% smaller than it was in the last quarter of 2019, just before the coronavirus pandemic – a weaker recovery than any other major developed economy.
“With the services side of the economy continuing to slow in the face of rising borrowing costs and rising prices, it still appears we are on a slippery slope,” said Tom Stephenson, director of personal investments at Fidelity International.
Production in March was only 0.1% higher than February 2020, the last month before the pandemic.
“The economy’s weakness in March underscores its fragility despite lower wholesale energy prices, improved supply chain conditions and consumer confidence, which has also recovered from multi-year lows,” said KPMG economist Yael Selvin.
“While a recession is likely no longer at play, vulnerabilities from rising borrowing costs and tightening credit will likely hurt business and domestic activity this year.”
The Bank of England on Thursday predicted that the UK economy would grow 0.25% in 2023 as a whole – a weak expansion but an improvement over its previous forecast of a 0.5% contraction.
(Additional reporting by William James)
