ONS data

UK economy shrinks, Jubilee hits GDP in June

Queen and Paddington
The bank holiday for the Jubilee celebrations led to a fall in GDP

The UK economy shrank by 0.1% between April and June, compared to growth of 0.8% in the previous three months, according to the Office for National Statistics.

While hospitality benefited from the extra bank holiday in June for the Queen’s Platinum Jubilee celebrations, the overall economy took a hit, shrinking by 0.6% over the month.

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.”

He added: “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.”

Chancellor Nadhim Zahawi said: “Our economy showed incredible resilience following the pandemic and I am confident we can pull through these global challenges again. 

Nadhim Zahawi
Nadhim Zahawi: providing billions

“I know that times are tough and people will be concerned about rising prices and slowing growth, and that’s why I’m determined to work with the Bank of England to get inflation under control and grow the economy.

“The Government is providing billions of pounds of help for households with rising costs, including £1,200 for eight million of the most vulnerable households.”

The Bank of England has forecast the UK will fall into recession towards the end of this year and the downturn will last for the entirety of next year.

Alpesh Paleja, CBI lead economist, said: “The fall in activity over Q2 was widely expected, given the impact of the extra Jubilee bank holiday. The economy should return to growth in Q3 as the bank holiday effect comes out of the comparison. 

“But this growth won’t last. The forthcoming hike in Ofgem’s energy price cap will push inflation to new highs, leading to a significant economic downturn. Vulnerable businesses and households will be squeezed further, so it’s good to see both leadership candidates and the current government signalling further support will be provided to those hit hardest.

“Implementing other pro-growth decisions now – for example, adding flexibility to the Apprenticeship Levy will also pave the way for recovery beyond this crisis.” 

David Bharier, head of research at the BCC, said:  “Today’s 0.1% fall in GDP data is yet another signal that the UK economy is moving in an alarming direction. 

“While some consumer-facing industries have benefited from further withdrawals of Covid restrictions on travel, the retail sector saw a 1% decline in the quarter, reflecting the unprecedented pressures from inflation and global supply chain disruption. 

“The 0.2% fall in real household consumption reflects continued weakness in consumer confidence and a mounting cost of living crisis. 

“Business investment remains a serious challenge. While investment in construction has increased, other forms of investment, including for machinery and equipment, continue to fall.

Leave a Reply

Your email address will not be published. Required fields are marked as *

This site uses Akismet to reduce spam. Learn how your comment data is processed.