UK economy contracted by 0.3% in April

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The UK economy contracted by 0.3 per cent in April, the steepest monthly drop since 2023, underscoring the challenge for chancellor Rachel Reeves to boost growth amid higher global uncertainty.

Thursday’s monthly GDP figure from the Office for National Statistics was below the 0.1 per cent contraction forecast by economists polled by Reuters and follows growth of 0.2 per cent in March.

Weakness in the dominant services sector held back the economy, with output falling 0.4 per cent. Manufacturing production fell by 0.9 per cent.

The GDP figures are the first Donald Trump’s sweeping global tariffs took effect in April. UK companies have also faced an increase in national insurance contributions since April, while households are grappling with higher utility bills.

The latest snapshot of the economy comes after Reeves on Wednesday delivered the government’s spending review, which promised a boost for the NHS but real-term spending cuts for many Whitehall departments.

Responding to the GDP figures, Reeves said that “while these numbers are clearly disappointing, I’m determined to deliver on that mission”.

Following the release of the data, the pound dipped but remained up 0.2 per cent on the day at $1.357 against a broadly weaker dollar.

The UK economy grew by 0.7 per cent in the first three months of this year, but the Bank of England expects that to slow to 0.1 per cent in the second quarter. 

Financial markets anticipate that the BoE will leave interest rates unchanged at 4.25 per cent next week, having lowered borrowing costs four times since the summer of 2024.