The UK economy has contracted at the start of the second quarter following a robust beginning to the year, with the conflict in Iran expected to further dampen economic activity.
The Office for National Statistics reported on Friday that the UK's Gross Domestic Product fell by 0.1% in April. This compares with growth of 0.3% in March and 0.6% for the first quarter. This marks the first contraction since August of last year.
This decline matched the average forecast from economists.
The drop in output comes after the UK economy achieved a strong start to 2024, with first-quarter growth outpacing that of the United States and most European nations. However, this was partly due to activity being pulled forward into March, as businesses sought to complete work ahead of rising energy costs and supply chain disruptions stemming from the Middle East conflict.
Joe Nellis, an economic advisor at MHA, stated, "Persistent weak productivity, resulting from years of underinvestment, coupled with escalating geopolitical tensions are now exerting pressure on growth."
The Office for National Statistics reported that services output fell by 0.2% in April following growth in the previous two months. Meanwhile, industrial production showed no growth, although manufacturing output increased by 0.4%.
Services provided an initial boost to the economy early in 2024, while manufacturing performed relatively well. However, both sectors are facing increasing headwinds as persistently high energy costs put pressure on businesses and consumers.
The solid start to the year provided some relief for the Labour government, which placed growth at the core of its agenda upon taking office nearly two years ago. Yet, after a prolonged period of stagnation traceable to the 2008 financial crisis, the economy is expected to face a fresh setback as the latest energy shock takes effect.
Nellis added, "This level of growth does little to alleviate the pressure on the Chancellor, given the high level of government debt and tax revenues falling short of spending commitments."