Britain’s economy recorded growth of 0.0% in February as a wave of public sector strikes weighed on activity, offsetting a recovery in consumer spending despite the cost of living crisis.
The latest figures from the Office for National Statistics (ONS) showed the economy ground to a halt in February, falling below City expectations for a 0.1% month-on-month rise in gross domestic product (GDP), the total value added by the production of goods and services across the economy.
It followed growth of 0.4% in January, as revisions to earlier estimates pushed the economy back above pre-pandemic levels. However, the UK’s recovery to pre-Covid levels remained slower than that of any other G7 economy.
The ONS said construction grew strongly after a poor start to the year, with increased repair work taking place, alongside a boost from retail as many shops had a strong month for sales.
However, it said this had been offset by civil service and teachers’ strikes, hitting activity in the public sector, while unseasonably mild weather led to a fall in the use of electricity and gas. Manufacturing showed zero growth, while the UK’s dominant services sector fell by 0.1%, down from a revised growth rate of 0.7% a month earlier.
The figures come hours after the chancellor, Jeremy Hunt, insisted the UK would do “significantly better” than the International Monetary Fund’s forecast on Tuesday that the economy was expected to shrink by 0.3% this year.
Speaking to Bloomberg News on the sidelines of the fund’s spring meetings in Washington on Wednesday night, he said: “We will do better than that.”
Despite February’s flat performance, the chancellor said on Thursday that Britain’s economic outlook was “brighter than expected”, as he argued the country was set to avoid a recession this year.
Rachel Reeves, the shadow chancellor, said the figures showed the economy was inching along. “Despite our enormous promise and potential as a country, Britain is still lagging behind on the global stage with growth on the floor,” she said.
Strikes by teachers nationwide at the start of the month and in some regions of England on 28 February had the biggest drag on growth, pulling down output in the education sector by 1.7%. Strikes in the civil service at the start of February also weighed on growth.
Highlighting the impact of industrial action on the economy, the figures came as junior doctors in England staged a four-day strike in a deteriorating dispute over pay, amid government resistance to bigger wage increases across the public sector.
Output in the rest of the economy – the private sector – rose by 0.2%, as analysts said Britain’s economy appeared to be performing better than feared thanks to unexpected resilience in consumer spending.
In consumer-facing services output grew by 0.4%, an acceleration on January’s growth of 0.3%. Production output – which includes energy generation, mining, and manufacturing – fell on the month, as warmer weather led to a drop in demand as many families turned down the thermostat.
Paul Dales, the chief UK economist at the consultancy Capital Economics, said stronger wage growth and cost of living support from the government was helping to bolster household incomes, supporting the economy’s stronger than expected performance in recent months.
“The overall sense is that the economy is still proving resilient to the twin drags of high inflation and high interest rates,” he said.
Economists said Britain was likely to avoid a recession at the start of the year, but warned that high inflation and the delayed impact of previous interest rate increases from the Bank of England would likely spell a weak growth outlook at best.
After a stronger than expected January and flat performance in February, analysts said GDP would need to shrink by 0.5% or more in March for the economy to record a quarter of contraction. Two quarters of falling GDP are considered the technical definition of a recession.
Thomas Pugh, an economist at the accountancy firm RSM UK, said: “It’s more or less a 50:50 call as to whether the UK falls into a technical recession this year, the degree of strike activity may tip the balance. But even if the UK avoids a recession, growth is likely to be meagre through the rest of this year.”
