Cost of living: Inflation takes its toll as UK economy contracts in March | Economic news

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Britain’s economy contracted by 0.1% in March as soaring inflation weighed on demand to offset the boost expected from the end of COVID restrictions.

The monthly figure compares with zero growth in February and 0.7% growth in January, while the quarterly figure (between January and March) showed 0.8% growth, compared to 1.3% in during the previous three months.

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Chancellor Rishi Sunak said: “The UK economy has recovered quickly from the worst of the pandemic and our growth in the first months of the year has been strong – faster than that of the US, Germany and the UK. Italy, but I know these are always anxious times.

“Our recovery is disrupted by Putin’s barbaric invasion of Ukraine and other global challenges, but we continue to help people where we can.

“Growth is the best way to help families over the long term. In addition to easing immediate pressure on households and businesses, we are investing in capital, people and ideas to improve living standards across the country. ‘coming.”

Data from the Office for National Statistics (ONS) has been released as alarm bells ring over the country’s economic outlook, with the Bank of England warning last week that a recession weighed big Due to Cost of life crisis.

Families and businesses are under the weight of rising world prices largely caused by demand outstripping supply as the covid the crisis is easing and, lately, the effects of Russia’s war in Ukraine.

Read more: Find out how much your spending has increased over the past five years

No easing of inflation

Separate figures released by the ONS next week are being touted by economists to show inflation approaching a 40-year high in April at around 8.5%.

The jump from the March level of 7% will be primarily a consequence of rising energy costs which will be passed through the supply chain, increasing the cost of doing business and ultimately the cost of daily goods and services.

There is also a direct price shock to reflect for the first time: the unprecedented £693 rise in the household energy price cap that took hold on April 1.

Alice Haine, personal finance analyst at DIY investment platform Bestinvest, said: “There is a high risk of a continued contraction in the coming months as the squeeze on real incomes intensifies amid the global economic crisis. cost of living, with inflation heading into double digits, raising the specter of stagflation (a combination of negative or stagnant economic growth and high inflation).”

Daniel Casali, chief investment strategist at Tilney Smith & Williamson, said: “It is important for the UK economy that labor demand and business investment intentions remain strong.

“This should at least reduce the risk of a sharp slowdown in overall growth. The Bank of England expects GDP to be stable in the second quarter, although there is potential for a modest contraction.”

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How Russia Affects Our Energy Bills

“There’s No One Around”

For many small business owners, however, the situation is already dire.

Barry Whitehouse, owner of Banbury-based art store The Artery, said: “We’ve just had one of our worst weeks since the previous recession. Total revenue for the week didn’t even cover staff salaries .

“Loss of footfall and empty streets make it impossible to create a sale or welcome a customer. There is no one around.

“Online sales have fallen sharply as everyone is keeping an eye on their energy bills to see what money is left, and there is suddenly a drop in demand for shop items and our courses. .

“I’m really worried.

“My savings are gone and I have nothing left to keep the business afloat with no sales or attendance. I won’t survive many more weeks like this.”

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Why are your bills increasing?

“A Theater of Cruelty”

Sandra Wilson, director of Ipswich-based recruitment and human resources firm Cottrell Moore, said: “The UK economy is starting to look like a theater of cruelty.

“Whether you’re pessimistic or optimistic, the reality is the same: we all pay more and most of us don’t earn more.

“The economic sea is getting extremely rough, and many people will go too far if the government doesn’t act immediately.”

“The Slaughterhouse Economy”

Dave Kelly, co-founder of Bristol-based butcher Ruby & White, said: “At the moment it feels like the UK economy is heading for the slaughterhouse.

“Inflation, soaring energy bills, rising taxes and interest rates are crippling households across the country. Worse still, it feels like the government is watching and doing nothing.

“For us, sales are holding up for now, but we’re seeing a bit more people ordering cheaper cuts. We’re probably helped by the fact that more people are choosing to stay in than go out.”

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