The CBI anticipates the economy will return to growth in the next quarter, but cautioned that the United Kingdom is “approaching stagnation-like conditions rather than delivering the robust, sustainable growth we require.”
The private sector in the United Kingdom has contracted for the eighth consecutive quarter.
According to data from the Confederation of British Industry, its most recent snapshot of the sector revealed “green shoots.” With projections that the UK industry will resume development in the next quarter.
Alpesh Paleja, the organization’s chief economist, described the anticipated return to growth as “encouraging” and said that it was supported by other data indicating some resilience in economic activity.
“However, let’s be clear: at best, this demonstrates an economy that is flirting with stagnation rather than delivering the robust, sustainable growth we require,” he cautioned.
In the three months leading up to March, private sector activity in the United Kingdom contracted by approximately 4%. Marking the eighth consecutive quarter of decline but the smallest decrease since July of last year.
The primary factor was the lackluster services sector; the survey revealed an 11% decline in consumer service volumes.
During the quarter, distribution activity increased marginally while manufacturing contracted, albeit at a slower rate.
In his spring budget, the Chancellor of the United Kingdom, Jeremy Hunt, announced plans to deliver growth. Including increased childcare provision to assist parents to return to work.
In addition, the Office for Budget Responsibility (OBR) confirmed the UK economy is on course to avoid a technical recession. Which is defined as two consecutive quarters of decline.
Mr. Palega stated that the United Kingdom still faces “considerable economic headwinds.”
“Inflation remains stubbornly high, and while businesses and consumers can anticipate lower energy prices by the end of the year, household budget constraints will weigh on consumer spending,” he said.
