Official data released on Thursday showed that Britain's economy stagnated in February as strikes by public workers hit output, but a bounce in January was stronger
than initially thought. The Office for National Statistics (ONS) revised up its estimate for January's growth to 0.4% from 0.3%, meaning Britain is likely to avoid the first-quarter contraction that the Bank of England predicted last month. While sidestepping a recession for the time being, the bigger picture remains weak. Over the last year, Britain's economy has stagnated, and the International Monetary Fund (IMF) projects that Britain will be bottom of the world's major economies in terms of expected economic growth in 2023, with a 0.3% contraction pencilled in.
In February, economic output was flat in month-on-month terms, against the consensus forecast for a 0.1% increase in a Reuters poll of economists. The ONS said the vast services sector contracted by 0.1% in February, hurt by strikes by teachers and other public sector workers. However, this was offset by a surge in the much smaller construction sector, which rebounded from bad weather in January, according to the ONS. The upward revision to January means the economy would need to have shrunk by 0.6% in March for the first quarter as a whole to show a contraction.
Suren Thiru, economics director at accountancy body ICAEW, said recession fears would linger as higher taxes and borrowing costs offset the fall in inflation and government support for energy bills. He also said that the BoE should end its run of interest rate hikes next month, as raising rates would further weaken the country's growth prospects.
Finance minister Jeremy Hunt said the data showed Britain's economic performance had been stronger than thought. He pointed to the 2.4% surge in construction output - which represents around 6% of the economy - as the sole driver of economic growth in February. ONS officials attributed the jump in construction output to a recovery in February from disruption caused by bad weather in January, especially in new work, and a surge in maintenance and repair work.
The IMF's projection of a contraction in Britain's economy is worrying, and it underscores the need for the government to take urgent measures to stimulate growth. The strikes by public workers have had a negative impact on the economy, and the government needs to find a way to resolve these disputes as soon as possible. Higher taxes and borrowing costs are also likely to continue weighing on the economy, and the government needs to find ways to address these issues.
In conclusion, while Britain has avoided a recession for now, the economy remains weak, and there are concerns about its future prospects. The government needs to take urgent measures to address the issues that are holding back growth, including the strikes by public workers, high taxes, and borrowing costs. Failure to do so could result in a recession in the near future, which would have significant negative consequences for the country and its people. Photo by Alex Guibord from Toronto, Canada, Wikimedia commons.