The UK economy grew more slowly in February, an indicator that the rebound was losing steam even before the impact of Russia’s invasion of Ukraine, says Suren Thiru, Head of Economics at the British Chambers of Commerce.
He said: “Tourism-related industries and accommodation services recorded the strongest improvements in the month as the end of Plan B restrictions, and reduced concerns over Omicron, supported activity. However, this was mostly offset by a significant drop in NHS Test and Trace services and vaccine activity as well as declines in industrial and construction output.
“February’s slowdown is likely to be the start of a prolonged period of considerably weaker growth as rising inflation, surging energy bills and higher taxes increasingly damages key drivers of UK output, including consumer spending and business investment.
“Weakening health sector output following the end of free Covid testing and mass vaccinations, is also set to weigh on UK GDP in the near term.
“The Government must provide urgent financial support, through the expansion of the energy bills rebate scheme, to include small firms and energy intensive businesses, and an SME energy price cap to protect smaller firms from some of the price increases.”
UK trade data from the ONS remained volatile in February 2022 as changes in data collection methods unwind. The figures for February 2022 reported a 25% increase in exports (following a 22% decline the previous month). Comparing the last 3 months data together with that over the same period 4 years ago reveals that exports in goods were £1bn lower (1.2%). It is hard to discern therefore any sustained increase in UK exports of the levels currently occurring in our largest neighbouring trading partners.
Furthermore, the ONS Business Insights and Conditions Survey reveals increasing challenges faced by firms with export and import paperwork respectively. 68% of exporters and 70% of importers reported these challenges in February to March 2022 a rise of 7% and 9% respectively. This echoes BCC data which finds a similar worsening trend.
