- Lackluster Economic Growth: UK economy described as “listless” with minimal growth since 2019
- Economic Contraction in May: Decrease of 0.1% attributed to additional bank holiday and rising living expenses
- Impact of Inflation and Interest Rates: High inflation puts pressure on households and businesses, increased borrowing costs
Since 2019 before the pandemic, the UK economy has scarcely grown, with one economist describing it as “listless.
It decreased by 0.1% in May due in part to the additional bank holiday for the coronation of the king, which resulted in one fewer working day than usual.
Rising living expenses and interest rates have put pressure on households and enterprises.
When an economy contracts, people may lose their employment and find it more difficult to receive cost-of-living increases.
The annual rate of price increase, or inflation, is 8.7%.
The Bank of England has been increasing interest rates to curb inflation, but this is having a ripple effect on consumer borrowing costs, increasing mortgage and loan payments for millions.
Chancellor Jeremy Hunt stated that high inflation was negatively impacting the economy.
The most effective method for reviving economic growth and relieving family pressure is to reduce inflation as soon as possible. Our strategy will succeed, but we must adhere to it.”
The Office of National Statistics (ONS) reported that the drop in economic activity in May followed 0.2% growth in April.
It was reported that the manufacturing, energy, and construction industries, as well as pub and tavern sales, declined.
However, the report indicated that the health sector improved and the IT industry had a “strong month.” In May, strikes had a lesser impact on the economy than in April.
The coronation, which resulted in three bank holidays in May instead of the usual two, slowed down some industries, according to the ONS, but boosted others, such as the arts and entertainment.
For the majority of individuals, economic growth is positive. Typically, it indicates that there is more employment and that businesses are more profitable, allowing them to pay employees and shareholders more.
The government receives more tax revenue as a result of the increased earnings and profits generated by a thriving economy.
It can either increase spending on benefits, public services, and government employee salaries or reduce taxes.
These things can be reversed when the economy contracts, but governments typically retain discretion over public expenditure.
According to Capital Economics, the 0.1% decline in May is not as severe as it appears because a portion of it was due to the extra bank holiday for the coronation of the king.
In addition, GDP – the official measure of the size of the economy – was projected to increase by approximately 0.1% in the three months leading up to June.
We sense that underlying activity is still growing, albeit at a snail’s pace,” its chief UK economist, Paul Dales, said.
However, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, cautioned that May’s numbers indicate growth “remains sluggish.
And Martin Beck, chief counsel of the economic forecasting group EY Item Club, stated that “the economy remains weak in the larger picture.”
Since the end of 2019, virtually no growth has occurred.
