London Daily

Focus on the big picture.
Friday, Aug 22, 2025

UK economy being hit on multiple fronts - and there's little cause for celebration despite growth

UK economy being hit on multiple fronts - and there's little cause for celebration despite growth

The services sector, which includes everything consumer facing from shops and restaurants to hairdressers and travel agencies contracted by 0.8% in March.
Britain may avoid falling into recession this year but the recent set of economic data hardly gives us much cause for celebration.

Over the past four quarters the country has grown by; 0.1%, 0.1%, -0.1%, 0.1%, and ours is the only G7 economy that still hasn't recovered to its pre-pandemic size.

In March alone, the economy shrank by 0.3%, which was worse than expected by economists.

The country is being hit on multiple fronts, many of them related.

Widespread industrial action is weighing on public sector output.

Meanwhile high inflation and high taxes are hitting disposable incomes, which means people are more cautious about spending.

Consumer spending was flat in the first quarter of the year, but households are still running down their lockdown savings in an effort to maintain their living standards. They will soon start to run dry.

The consumer facing services sector, which includes everything from shops and restaurants to hairdressers and travel agencies contracted by 0.8% in March.

Economists said that wet weather may have played a part. The manufacturing and construction sectors fared better but, considering the services sector is the bedrock of the UK economy, the latest data will make for unpleasant reading.

Jeremy Hunt, the chancellor, attempted to put a positive spin on the quarterly figures this morning, saying: "It's good news that the economy is growing."

It's true that the economy has been more resilient than many feared. Towards the end of last year, economists were forecasting that the country would be in recession by now, but it looks like we may avoid one altogether.

The Bank of England said yesterday that the country would actually eke out some growth this year, marking a dramatic upgrade to its forecasts.

Considering what the outlook looked like seven months ago - at the time of the "mini-budget" - that may be considered an achievement, albeit a consolatory one.
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