Construction cranes in London, on Feb. 10.Hollie Adams/Reuters
Wet weather helped bring Britain’s economic growth to a halt in April after a strong start to 2024, and the opposition Labour Party jumped on the figures to attack Prime Minister Rishi Sunak’s pre-election claims of a turnaround.
Gross domestic product was flat in April – as economists polled by Reuters had forecast – after a 0.4 per cent month-on-month rise in March, the Office for National Statistics said.
The figures followed labour market data on Tuesday that showed falling employment and rising unemployment but continued strong wage growth.
Financial markets showed little reaction to the figures, with investors still judging the prospect of a Bank of England interest rate cut next week as remote.
Rachel Reeves, who stands to become finance minister if the opposition Labour Party wins the election, sought to use the data to attack one of Sunak’s main election campaign messages.
“Rishi Sunak claims we have turned a corner, but the economy has stalled and there is no growth,” she said immediately after the figures were published.
Current finance minister Jeremy Hunt, from Sunak’s Conservative Party, pointed to figures showing the economy grew 0.7 per cent over the three months to April, the fastest expansion for almost two years.
“There is more to do, but the economy is turning a corner and inflation is back down to normal,” he said.
The Labour Party is on course to win the national election on July 4, according to opinion polls which give Keir Starmer’s party a roughly 20-point lead over the governing Conservatives.
After the shallow recession that lasted through the second half of 2023, the economy remains only 0.6 per cent larger than it was a year ago, and 2.2 per cent bigger than its size during the last national election of 2019 – a historically poor performance.
Paul Dales, chief economist at Capital Economics, said the stalling of growth in April did not raise the risk of a return to recession and seemed linked to wet weather which hurt construction and the retail sector.
“Overall, despite the stalling of the recovery in April, the dual drags on economic growth from higher interest rates and higher inflation will continue to fade throughout the year,” Dales said.
“That will generate a bit of an economic tailwind for the next government.”
The BoE is expected to start cutting interest rates from their 16-year high of 5.25 per cent later this year.
Growth in April was driven entirely by the services sector, with information and technology and the professional and scientific sectors expanding rapidly. However, manufacturing and construction output – both down 1.4 per cent in monthly terms – fell by more than any economist polled by Reuters predicted.