THE speed at which the UK economy grew slowed significantly in February as the cost-of-living crisis started to take hold, new data shows.
The Office for National Statistics (ONS) said gross domestic product (GDP) increased just 0.1% in February, compared to a rise of 0.8% in January. This was below an expected rise of 0.3% predicted by economists.
Growth was seen in the hospitality and leisure sectors as Omicron infection numbers eased compared to December and January.
GDP was hit as UK Government spending on the NHS Test and Trace system and Covid-19 vaccination booster programme slowed in February.
READ MORE: Rishi Sunak must 'consider' his role as Chancellor after tax and green card scandals
There were also slowdowns in construction industries as business confidence took a knock, with the cost-of-living crisis and high energy bills leaving bosses uneasy about making significant investments.
Suren Thiru, head of economics at the British Chambers of Commerce (BCC), said: “While economic output continued to rebound in February, the significant slowdown in growth indicates that the UK economy was losing steam even before the impact of Russia’s invasion of Ukraine.
“Tourism-related industries and accommodation services recorded the strongest improvements in the month as the end of Plan B restrictions, and reduced concerns over Omicron, supported activity.
“However, this was mostly offset by a significant drop in NHS Test and Trace services and vaccine activity as well as declines in industrial and construction output.”
“February’s slowdown is likely to be the start of a prolonged period of considerably weaker growth as rising inflation, surging energy bills and higher taxes increasingly damages key drivers of UK output, including consumer spending and business investment.”
The key driver of growth for the economy during the month of February came from the services sector – up 0.2% – with the ONS saying there were increases in travel agency, tour operator and other reservation services – up 33.1% on the month.
Accommodation and food services were up 8.6% in February, with healthy growth in hotel bookings as the Omicron variant faded and people tried to get away.
The biggest negative contributor in consumer-facing services was the motor industry with sales of cars and repairs down.
This also impacted car factories, which saw slowdowns, along with falls in the manufacturing of computers and other electronics – where chip shortages continue to bite.
Overall, the services are now 2.1% above pre-Covid levels with construction up 1.1%. But production is now 1.9% below pre-pandemic levels.
Chancellor Rishi Sunak said he welcomed the "positive growth" seen in February, and suggested the slowing was down to the war in Ukraine.
“Russia’s invasion of Ukraine is creating additional economic uncertainty here in the UK, but it is right that we are responding robustly against Putin’s unprovoked invasion," he said.
READ MORE: Ian Blackford taken aback at Sky News host's Sunak taxes 'sexism' question
Separately, the ONS released a new set of figures caused by a change in how HM Revenue and Customs measures exports to the EU.
While the new measure shows a 25.4% rise in goods exports to the EU in February compared to the month before, this was a decrease by 0.3% compared to December 2021 under the old system.
The ONS suggested the new month-on-month movements should not be relied on when interpreting the latest data for exports to the EU.
Exports to non-EU countries dropped 6.4% between January and February, the figures show.
The UK’s trade deficit widened by £10.2 billion to £54.4 billion in the three months to February.
How is the cost of living crisis affecting you?
From soaring energy bills to rising food prices and stagnating wages, it's getting harder and harder for many Scots to make ends meet. We want to tell the stories of how the cost of living crisis is impacting people in Scotland. Are you struggling to choose between heating and eating? Are you finding it increasingly difficult to afford your weekly shop? If so, we want to go beyond the statistics and tell your story.
Why are you making commenting on The National only available to subscribers?
We know there are thousands of National readers who want to debate, argue and go back and forth in the comments section of our stories. We’ve got the most informed readers in Scotland, asking each other the big questions about the future of our country.
Unfortunately, though, these important debates are being spoiled by a vocal minority of trolls who aren’t really interested in the issues, try to derail the conversations, register under fake names, and post vile abuse.
So that’s why we’ve decided to make the ability to comment only available to our paying subscribers. That way, all the trolls who post abuse on our website will have to pay if they want to join the debate – and risk a permanent ban from the account that they subscribe with.
The conversation will go back to what it should be about – people who care passionately about the issues, but disagree constructively on what we should do about them. Let’s get that debate started!
Callum Baird, Editor of The National
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules hereLast Updated:
Report this comment Cancel