Britain’s economy shrank in the second quarter, official data showed on Friday, as the country heads into recession under a new prime minister.
The UK’s gross domestic product fell 0.1 percent in April-June after rising 0.8 percent in the first quarter, the Office for National Statistics said in a statement.
The Bank of England (BoE) expects the economy to enter a year-long recession by the end of 2022 as Britons endure a cost-of-living crisis with inflation at the highest level in decades.
“As growth was revised down slightly in May and June showed a notable contraction, the economy as a whole contracted slightly in the second quarter,” said Darren Morgan, director of economic statistics at ONS.
“Health was the main reason for the slowdown in the economy as both (Covid) testing and tracing and vaccination programs were halted while many retailers also had a difficult quarter.”
Morgan said this was “partially offset by the growth of hotels, bars, hairdressers and outdoor events across the borough, partly due to people celebrating the platinum jubilee” which marked Queen Elizabeth II’s 70 years on the throne .
The ONS added that the UK economy slumped 0.6 percent in June.
– New PM –
Following Friday’s data, Finance Minister Nadhim Zahawi said he was “determined to work with the Bank of England to bring inflation under control and stimulate the economy”.
But Prime Minister Boris Johnson will not make “major fiscal interventions” before leaving office next month, his spokesman said on Monday, calling for immediate government action to deal with Britain’s cost of living crisis.
Johnson, who returned to his desk last week after a five-day delayed honeymoon with his wife Carrie in Slovenia, was criticized for his absence when the BoE warned of a recession last week.
His trip coincided with Zahawi, who was also on vacation as the central bank hiked interest rates by the widest range in nearly three decades to curb rising inflation.
Johnson, who announced last month that he would step down on September 6 after a spate of scandals, will hand power to either Liz Truss or Rishi Sunak after a summer-long Conservative leadership struggle.
Secretary of State Truss and Sunak – Zahawi’s predecessor as Chancellor of the Exchequer – have fallen out over how to handle the crisis.
Truss is planning an emergency budget to cut taxes and review the independent BoE’s anti-inflation mandate.
But Sunak said tax cuts funded by more borrowing would force the bank to raise interest rates even more, stressing the need to maintain fiscal tightness and tame price pressures first.
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