London Daily

Focus on the big picture.
Friday, Aug 07, 2026

Sunak was already under pressure from the cost of living crisis - the GDP figures might force him to make a major intervention

Sunak was already under pressure from the cost of living crisis - the GDP figures might force him to make a major intervention

With inflation forecast to exceed 10%, the highest it's been in 40 years, the Bank of England has already warned it will cause the economy to shrink. Recession is entirely possible.

Be in no doubt, today's GDP figures are bad news indeed.

Bad news as they show the economy is shrinking sooner than expected, down 0.1% in March.

But bad news too, in terms of what it heralds for the rest of the year. All the signs and predictions were already that the worst is set to come later this year. The question now is: How much worse?

And at the centre of it all is a chancellor under immense pressure to act, not least from within his own party.

Rishi Sunak's challenge: to show that he is not out of touch with the struggles people are facing and that he can manage the big challenges when he no longer has a blank cheque as he did during the pandemic.

While the economy did grow slightly overall in the first quarter of the year (0.8%), the rate of growth has slowed and it's what happened in March that will be the most concerning.

A slowdown is hardly a surprise. Lasting problems in supply chains coupled with high energy costs are squeezing the production of manufacturers. But there is another crucial reason.

As inflation soars to new 30-year highs, there is a fear that consumers will begin to cut their cloth, and hold back from the spending so needed to shore up the post-pandemic recovery.

Indeed, official measures show that retail sales fell by 1.4% between February and March, while Open Table data shows that the number of seated diners dropped by three percentage points.

Recession is entirely possible


People may soon not have the money to spend, and that's a huge problem.

With inflation forecast to exceed 10%, the highest it's been in 40 years, the Bank of England has already warned it will cause the economy to shrink. Recession is entirely possible.

The chancellor knows this and many are asking why he's not doing more to help.

Interventions thus far have been judged by some as "simply not enough".

There was the Spring Statement that announced a cut in fuel duty and a rise to the threshold at which people start paying national insurance. There was also a £200 rebate offered on energy bills and an additional £150 through the council tax system for some households.

PM may want to see more action


But Mr Sunak is seemingly resisting another major tax or spending intervention in the immediacy.

Among those who want to see more action now, may well be the prime minister. He has reportedly been saying as much to MPs this week.

But the Treasury has denied there will be an emergency budget and the chancellor would not be drawn on when or if further tax cuts will come.

"We've done a lot already," he said.

"But I've always said I stand ready to do more as we learn more about the situation.

"And on energy prices in particular, the price cap protects people for some months to come, but I've said when we have a clearer picture about what happens with energy bills, we stand ready and I stand ready to support people."

'Standing ready' is not enough


There are many, of course, who will argue that "standing ready" is not enough when people are going hungry now.

Measures such as energy rebates take time to implement and need to be in place before the next price cap rise in October. Many experts, including the chief executive of Scottish Power, have urged further pre-emptive action.

There are of course reasons the chancellor may have for waiting and assessing. The public finances are still extremely strained following the pandemic and this is a fast-moving crisis.

But Mr Sunak was already a man under pressure; the disclosure of his wife's nom-domiciled tax status, his fine for breaking lockdown rules and critiques that he is out of touch with ordinary people to name just a few of his problems.

Today's GDP numbers may bring that pressure to bear - as the crisis worsens for millions around the country he may not be able to resist more major intervention much longer.

Newsletter

Related Articles

0:00
0:00
Close
HMRC’s 2029 Tax Shift Could Overlap Old and New Self-Assessment Bills
Thetford Disorder Prompts Expanded Police Powers Amid Asylum-Housing Protests
Cambridge Faces Calls for Independent Review of Jason Arday Appointment
Scotland’s ‘Cock of the North’ Woodland Is Being Felled After Wind Damage
Reform UK and Greens Unite Against Vast Solar Plans for Kent Marshland
New Zealand Draws Wealthy Americans With Revamped Investor Visa
Senate Panel Votes to Hold Anthony Fauci in Contempt After Fifth Amendment Testimony
Cambridge Professor Jason Arday Resigns as University Opens Inquiry Into His Credentials
Manchester Power Failure Disrupts Trains Across North West Into Friday
UK Fashion and Tourism Sectors Prepare for Strong Summer and Autumn Activity
London Residents Seek Appeal Against Approval for Chinese Super-Embassy Development
UK Environment Officials Issue Biosecurity Alert Over Rising Bluetongue Cases in Livestock
UK Charity Regulator Opens Investigations Into Donations Linked to Israeli Settlements
Gatwick Expansion and Chinese Embassy Plans Highlight Growing UK Infrastructure Disputes
UK Agriculture Authorities Warn of Rising Bluetongue Virus Cases Among Sheep Farms
UK Watchdog Finds Electronic Monitoring Failures Leaving Some Offenders Without Timely Alerts
Metropolitan Police Investigate Covent Garden Knife Attack That Injured Four Men
UK Government Confirms Severe Terror Threat Level as Prevent Programme Expands
Diageo Plans Guinness Expansion While Cutting Jobs Through Global Restructuring Programme
Bank of England Keeps UK Borrowing Costs Stable While Markets Await Future Rate Cuts
Gatwick Airport Wins Approval for Second Runway Expansion After Legal Challenges Fail
Apple Challenges UK Government Over Demand for Access to Encrypted iCloud Data
London Approves First Autonomous Taxi Licences for Wayve and Uber Passenger Trials
UK Artificial Intelligence Safety Institute Finds Advanced AI Models Showing Deceptive Behaviour in Security Tests
UK Small Boat Channel Crossings Fall Forty-Three Percent as Government Highlights France Cooperation
UK Government Plans Procurement Reforms to Boost British Jobs and Domestic Steel Supply Chains
Bank of England Holds Interest Rates at Three Point Seven Percent as Inflation Stays Above Target
EY Raises UK 2026 Growth Forecast to Zero Point Nine Percent as Energy Risks Remain a Concern
UK Artificial Intelligence Regulation and Public Infrastructure Investment Remain Key Policy Focus Areas
Kemi Badenoch Faces Criticism Over Appointment of Former Neo-Nazi Linked Figure to Advisory Role
AG Barr Reports £10 Million Sales Loss After Supply Chain and Planning Failures
UK Government Fast-Tracks Specialist Care Pathways for Motor Neurone Disease Patients
UK Government Connects More Than 60,000 Rural Homes and Businesses to Gigabit Broadband
Next Raises Full-Year Profit Forecast After Strong Summer Sales
Metropolitan Police Arrest Woman After Four Men Stabbed in Central London’s Covent Garden Area
UK Procurement Reform and Infrastructure Spending Signal New Focus on Regional Economic Growth
UK Government Expands Global Talent Visa Access for International Researchers and Innovators
NHS Launches £343 Million Expansion of Community Mental Health Centres Across England
UK Treasury Explores Higher Borrowing Capacity for Infrastructure and Housing Investment
UK Cabinet Office Reforms Procurement Rules to Direct £90 Billion of Public Spending Toward Jobs and Skills
UK Government Considers Public Inquiry Into Jeffrey Epstein’s Activities and Possible Institutional Failures
Britain’s AI Safety Institute Finds Advanced Models Creating Fake Identities and Malicious Code During Tests
Lightning Strike Kills Yala FC Player During Match in Southern Thailand
Senate Scrutinises AI-Driven Personalised Pricing
Spain Seeks Mainland Transfers for 1,100 Children Stranded in Ceuta
UK Government Pushes New Procurement, Skills and Technology Policies Amid Economic Pressure
UK Charity Commission Investigates Donations Linked to Israeli Settlement Groups
UK Government Faces Pressure Over Possible Windfall Tax on Bank Profits
South East Water Provides Emergency Support After Kent Supply Disruptions
UK Defence Supports US Operation to Seize Russian-Flagged Oil Tanker in North Atlantic
×