Chancellor under pressure from some Tory MPs to cut taxes to boost growth
Economists said the UK economy grew 0.3 percent in January, recovering from a decline in December, but fears of stagnation remain.
The latest data from the Office for National Statistics beat expectations for growth of 0.1 percent and improved on December’s decline of 0.5 percent.
The ONS said GDP was flat in the three months to January.
Darren Morgan, director of economic statistics at the ONS, said: “The economy has partially recovered from the large slump seen in December. Over the past three months as a whole, and indeed over the past 12 months, the economy has shown zero growth.
“The main drivers of the January growth were the return of children to classes, after an unusually high absence in the run-up to Christmas, Premier League clubs returning to full schedules following the end of the World Cup and also access to private health providers.” Strong month. Postal services have also partially recovered from the effects of the December strike.
“These were offset to some extent by a slowdown in infrastructure projects and a marked decline in construction with another poor month, partly due to heavy rains.”
Ahead of next Wednesday’s budget, Chancellor Jeremy Hunt is coming under pressure from some Conservative MPs to cut business and personal taxes to boost economic growth.
But Mr Hunt fears the tax cuts could now push up inflation which stood at 10.1 per cent in January. Prime Minister Rishi Sunak has made halving inflation as one of his five priorities this year.
Responding to the latest GDP figures, Mr Hunt said: “Faced with serious global challenges, the UK economy has proved more resilient than many expected, but there is a long way to go. Next week, I will I’ll lay out the next steps in my plan to cut debt in half, cut debt and grow the economy – so we can all improve our standard of living.
But Shadow Chancellor Rachel Reeves said: “Today’s results show that our economy is still moving along this Tory path of managed decline. People may be asking themselves whether they feel better under the Tories, And the answer would be no.
Late last year the UK narrowly escaped recession – defined as two consecutive quarters of negative growth. Although the economy shrank 0.2 percent in the third quarter from July to September, it remained stable in the three months to December.
Earlier this year, the Bank of England softened its forecasts for this year, saying the expected recession would be short and shallow, with a 0.5 percent decline in GDP.
The Office for Budget Responsibility is also expected to announce next week that Britain will have a shorter and shallower recession than last November’s penciling.
Economists welcomed better-than-expected GDP data for January but said a recession is still on the cards for 2023.
Yael Selphin, chief economist at KPMG UK, said: “A significant fall in wholesale gas prices and a reduction in supply chain disruptions have provided a welcome boost to economic prospects for early 2023.
“But this may not be enough to stave off a recession in the first half of this year, as consumer spending remains weak, being squeezed by higher house prices and higher interest rates.”
Richard Carter, head of fixed interest research at Quilter Cheviot, said: “The UK may have avoided recession at the end of 2022, but today’s GDP figures suggest otherwise.”
Ruth Gregory, UK deputy chief economist at Capital Economics, said: “A 0.3 per cent rise in real GDP in January has left the economy in a better position than we expected a few months ago. But look beneath the surface But the figures show that the economy is much weaker than it appears.
Mr Hunt could have an extra £30 billion in next Wednesday’s budget, partly from higher tax receipts expected in January.
But he is expected to focus his budget on incentives to boost business investment and keep the energy price cap at £2,500 a year for a typical household, instead of raising it to £3,000 in April.
But millions of families are still feeling the pressure from high energy bills, rising food prices and mounting mortgage and rent payments.
In February, the Bank of England’s monetary policy committee raised interest rates to 4 percent, the highest level in 14 years. Analysts expect the rate to reach 4.5 per cent in the summer.
Last week, Bank Governor Andrew Bailey warned that raising rates may be “appropriate” to control inflation, but cautioned against market expectations that interest rates would continue to rise.
Credit: www.standard.co.uk /