London Daily

Focus on the big picture.
Sunday, Oct 05, 2025

UK growth stutters in February as cost-of-living squeeze looms

UK growth stutters in February as cost-of-living squeeze looms

Britain's economy slowed more sharply than expected in February, reflecting a hit to car production from component shortages, storm disruption and reduced health spending as households braced for a tighter cost-of-living squeeze.
Britain's economy slowed more sharply than expected in February, reflecting a hit to car production from component shortages, storm disruption and reduced health spending as households braced for a tighter cost-of-living squeeze.

Monthly gross domestic product growth was just 0.1% in February compared with 0.8% in January, the Office for National Statistics said on Monday, below the 0.3% forecast by economists in a Reuters poll.

"The news that the economy was hardly growing at all in February ... increases the risk of a contraction in GDP in the coming months as the squeeze on household real incomes intensifies," Ruth Gregory, senior UK economist at Capital Economics, said.

Britain's economy in February was 1.5% larger than it was two years earlier, just before the country was hit by the COVID-19 pandemic, the ONS said.

GDP collapsed by more than 9% in 2020, its biggest annual fall since just after World War One, but rebounded sharply in 2021 and suffered only a modest hit from the Omicron variant of coronavirus in December.

However, economists have downgraded their growth forecasts for 2022 due to a surge in inflation caused by rising energy and commodity prices -- partly linked to the war in Ukraine -- as well as ongoing supply-chain difficulties since the pandemic.

Last month the government's Office for Budget Responsibility cut its forecast for growth in 2022 to 3.8% from 6.0% in its previous forecast in October, predicting that inflation would hit a 40-year high of 8.7% later this year.

The squeeze on households' disposable income from higher inflation and a payroll tax rise that took effect in April will be the biggest since records began in 1956/57, the OBR said.

Finance minister Rishi Sunak -- whose popularity has slumped after offering only limited support to help households in a fiscal statement last month -- said he welcomed the continued growth.

However, some analysts think the economy will shrink over the three months to June, reflecting reduced COVID-related health spending and an extra public holiday to mark Queen Elizabeth's Golden Jubilee, as well as reduced household disposable income.

"Given this weak near-term outlook for GDP growth, we continue to think that the (Bank of England) will stop increasing Bank Rate after raising it to 1.0% next month," Pantheon Macroeconomics's Samuel Tombs said.

Britain's dominant services sector drove monthly growth in February as the Omicron wave of coronavirus cases ebbed.

Services output, up 0.2%, was boosted by a surge in travel bookings as COVID-19 restrictions eased, although this was largely offset by a sharp fall in health spending after COVID-19 testing and vaccination halved from January's high level.

Factory output dropped by 0.4% reflecting continued falls in car production due to component shortages and declines in other areas, while milder-than-usual winter weather depressed demand for electricity, causing power generation to fall by 1.0%.

Storms and rising materials costs hurt construction, where output fell by 0.1% on the month.
Newsletter

Related Articles

0:00
0:00
Close
Trump Stands Firm in Shutdown Showdown and Declares War on Drug Cartels — Turning Crisis into Opportunity
Surge of U.S. Billionaires Transforms London’s Peninsula Apartments into Ultra-Luxury Stronghold
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Jeff Bezos Calls AI Surge a ‘Good’ Bubble, Urges Focus on Lasting Innovation
Japan’s Ruling Party Chooses Sanae Takaichi, Clearing Path to First Female Prime Minister
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Taylor Swift’s ‘Showgirl’ Launch Extends Billion-Dollar Empire
Trump Administration Launches “TrumpRx” Plan to Enable Direct Drug Sales at Deep Discounts
Trump Announces Intention to Impose 100 Percent Tariff on Foreign-Made Films
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Singapore and Hong Kong Vie to Dominate Asia’s Rising Gold Trade
Trump Organization Teams with Saudi Developer on $1 Billion Trump Plaza in Jeddah
Manhattan Sees Surge in Office-to-Housing Conversions, Highest Since 2008
Switzerland and U.S. Issue Joint Assurance Against Currency Manipulation
Electronic Arts to Be Taken Private in Historic $55 Billion Buyout
Thomas Jacob Sanford Named as Suspect in Deadly Michigan Church Shooting and Arson
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
New York Man Arrested After On-Air Confession to 2017 Parents’ Murders
U.S. Defense Chief Orders Sudden Summit of Hundreds of Generals and Admirals
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
Trump Claims FBI Planted 274 Agents at Capitol Riot, Citing Unverified Reports
India: Internet Suspended in Bareilly Amid Communal Clashes Between Muslims and Hindus
Supreme Court Extends Freeze on Nearly $5 Billion in U.S. Foreign Aid at Trump’s Request
Archaeologists Recover Statues and Temples from 2,000-Year-Old Sunken City off Alexandria
China Deploys 2,000 Workers to Spain to Build Major EV Battery Factory, Raising European Dependence
Speed Takes Over: How Drive-Through Coffee Chains Are Rewriting U.S. Coffee Culture
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Ringo Starr Champions Enduring Beatles Legacy While Debuting Las Vegas Art Show
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Colombian President Petro Vows to Mobilize Volunteers for Gaza and Joins List of Fighters
FBI Removes Agents Who Kneeled at 2020 Protest, Citing Breach of Professional Conduct
Trump Alleges ‘Triple Sabotage’ at United Nations After Escalator and Teleprompter Failures
Shock in France: 5 Years in Prison for Former President Nicolas Sarkozy
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
BNP Paribas Abandons Ban on 'Controversial Weapons' Financing Amid Europe’s Defence Push
Typhoon Ragasa Leaves Trail of Destruction Across East Asia Before Making Landfall in China
The Personality Rights Challenge in India’s AI Era
Big Banks Rebuild in Hong Kong as Deal Volume Surges
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Arnault Denounces Proposed Wealth Tax as Threat to French Economy
Study Finds No Safe Level of Alcohol for Dementia Risk
Denmark Investigates Drone Incursion, Does Not Rule Out Russian Involvement
Lilly CEO Warns UK Is ‘Worst Country in Europe’ for Drug Prices, Pulls Back Investment
Nigel Farage Emerges as Central Force in British Politics with Reform UK Surge
Disney Reinstates ‘Jimmy Kimmel Live!’ after Six-Day Suspension over Charlie Kirk Comments
U.S. Prosecutors Move to Break Up Google’s Advertising Monopoly
Nvidia Pledges Up to $100 Billion Investment in OpenAI to Power Massive AI Data Center Build-Out
U.S. Signals ‘Large and Forceful’ Support for Argentina Amid Market Turmoil
×