• Swindon & Wiltshire News
• Friday January 13 2023
• Author Name: Peter Davison

Surprise economic growth suggests UK may avoid recession for now – but business leaders are not happy

The UK economy unexpectedly grew 0.1 per cent in November, according to official figures released this morning (Friday).

The economy had been widely expected to contract in November, following growth of 0.5 per cent in October, but it still appears to be weak – in the three months to November, it shrank by 0.3 per cent.

The Office for National Statistics said pubs and restaurants contributed to growth as people went out to watch matches.

The services sector grew by 0.2 per cent and was the main driver of the growth in GDP, with the largest contributions coming from administrative and support service activities and information and communication.

Output in consumer-facing services grew by 0.4 per cent in November 2022, following growth of 1.5 per cent in October 2022. The largest contribution to growth came from food and beverage service activities in a month where the FIFA World Cup started. Retail trade fell by 0.4 per cent.

Production output decreased by 0.2 per cent with manufacturing highlighted as the main driver of negative production growth, partially offset by a positive contribution from mining and quarrying.

And the construction sector was flat in November 2022 after growth of 0.4 per cent in October 2022.

Reacting to the figures, David Bharier, head of research at the British Chambers of Commerce, said: “Today’s GDP figures for November provide further evidence that UK economic growth is heading in the wrong direction, despite this period normally being among the busiest for the retail sector.

“While month-on-month GDP stood at 0.1 per cent, this is a volatile measure. The three-month average, standing at –0.3 per cent, sends a clearer signal of the current trajectory of the economy.

“Unprecedented energy costs, new trade barriers with the EU, and lasting damage caused by Covid lockdowns have created the hardest trading conditions for small businesses in recent history.

“Our latest Quarterly Economic Forecast expects five consecutive quarters of recession lasting until the end of 2023, and our most recent business survey points to significant falls in longer-term business confidence.

“To get back to growth in the long-term, firms will need to see the removal of trade barriers, particularly with the EU, investment in public infrastructure, and measures to improve their access to appropriately skilled staff.”

Martin McTague, national chairman of the Federation of Small Businesses (FSB), said: “The 0.1 per cent growth in November is encouraging, but the concerns that small businesses have over the economy’s direction of travel have not been laid to rest, even though the men’s football World Cup gave a fillip to the hospitality sector as people gathered to watch games.

“With costs remaining high for small firms and households alike, policymakers cannot rest on their laurels. Inflation needs to be brought down, there remains huge uncertainty over energy prices, and consumer confidence remains stubbornly low.

“We’re hearing from small businesses who aren’t just worried for themselves and their own firms – they are worried for the future of their fellow local businesses, and the vibrancy of their community.”

And Alpesh Paleja, lead economist at the CBI, said: “While the economy performed better than expected in November, the data can’t mask the underlining problems in the UK economy.

“High inflation is severely impacting household budgets and businesses are facing intense cost pressures. As a result, consumer spending and investment plans are weakening.

“The question for the government now is not whether we will fall into recession, but how long and deep the recession will be.

“If we want to curb the extent of a downturn, then the Prime Minister and the Chancellor need to stay alive to enacting pro-growth measures. Notably, introducing a permanent full investment allowances regime will help to shore up capital spending, during a time of high inflation and constrained demand.

“The positive impact on the supply side of the economy will also bode well for growth prospects over the longer term.”