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UK economic growth is slowing

UK economic growth is slowing
© Michael Boalch

One of the key metrics of a nation’s economic health comes in the form of the monthly growth figures. The percentage by which the economy expands from one month to the next shows us the level of the economic activity that’s taking place and whether it’s trending up or down.

Economic growth has slowed in the UK as we can see in the February data that was recently released by the government. It stood at a growth level of just 0.1% on the previous month. That’s down from a growth level of 0.8% in the month prior.

Declining Growth Percentages

Trends are considered important when tracking economic data and the national and global level. As we’ve shown above, the data is currently telling us that the recovery of the UK economy after the pandemic is currently slowing. There’s a wide variety of reasons why that might be happening. In the UK and in most other countries, problems linger associated with the pandemic, supply chains, and inflation spurred on by years of lax monetary policy and money printing.

Global Uncertainty

The global picture from an economic point of view is currently very unclear on many different fronts. Central banks are hiking interest rates in response to rising inflation figures, and that’s having a knock-on effect on businesses and their economic output. The UK has not been immune to those trends. Other forms of uncertainty come from a return to lockdowns in China in response to Covid-19 case rate spikes. With China being such a huge and influential player on the global stage, that’s causing a lot of worry and uncertainty.

Supply Chain Problems

That last point is particularly worrying for businesses in the west because so many of them are now reliant on Chinese suppliers and manufacturers. When supply chains start to get congested again, that obviously causes a slowdown for businesses in countries like the UK, and their economic activity and output naturally drop as a result of those hold-ups. It’s a problem without easy solutions in the near term if lockdowns continue or increase in Asia.

Remote Working is Persisting

One thing that we know about the way in which work and business have changed since the pandemic is the exodus from the traditional office. Many businesses now operate with remote workforces, meaning each person simply works at home a large part of the time or even all the time. Businesses in some sectors have even abandoned the use of an office altogether and instead use a physicaladdress service combined with a remote workforce to operate. It’s easier for bigger businesses and businesses with already small teams to make this move. But that businesses no longer pay to rent buildings and the reduction in workers in city centres means that economic activity has been hit.

A Fall in Industrial Production

As a result of slowing demand and the supply chain issues discussed above, the UK has experienced a slowdown in industrial production as well. This is an indicator that analytics and economists tend to look at when judging the overall health of an economy. It’s clear that production isn’t picking up quite yet the way many people would like it to. And it’s not clear how smooth the back to a buoyant industrial production sector will be.

Revenue from Tourism is Returning

One sector that is rebounding at the moment is tourism. With the end of lockdowns in most locations, people are able to travel for both business and leisure in a way that wasn’t really possible for a couple of years. Therefore, it’s not at all surprising that the revenue of companies in the tourism industry has continued to rise, even through the traditionally quieter winter months.

GDP is Above Pre-Pandemic Levels

It’s not all bad news. There are signs that the economy is doing comparatively well compared to even before the pandemic. We can see this by comparing GDP now to the month before the first lockdowns in the UK began, which was February 2020. We’re now sitting 1.5% higher than that month.

It’s clear that there’s still a lot of uncertainty not just for the UK economy but for the global economy too. There are lots of variables and we’re seeing changes from month to month in terms of economic growth and output that reflect that fact. Balance the desire for steady growth with the threat of inflation is something else that governments and central bankers around the world will need to keep an eye on.

Source: London Issue