UK GDP falls 0.1 per cent as covid-19 vaccination programmes wind up
The UK's economy shrank over the last three months as spending on test and trace and the Covid-19 vaccine programme subsided, figures show.
Gross domestic product (GDP) fell by 0.1 per cent between April and June, the Office for National Statistics said.
It is a big step down from the first quarter of the year, when GDP rose 0.8 per cent.
The data may not be the start of a recession - which is defined as two quarters of GDP decline - but experts are predicting the UK will slip into a recession later this year.
"While we see increasing signs of underlying weakness in the economy, we expect a more severe downturn to take place only from towards the end of this year," said Yael Selfin, chief economist at KPMG UK.
The Bank of England has predicted that the economy will shrink in the final quarter of this year and then every quarter in 2023.
The most recent drop came as GDP shrank by 0.6 per cent in June, and growth estimates for May were revised down from 0.5 per cent to 0.4 per cent.
The ONS said that the phasing out of spending on fighting Covid-19 was partly to blame for the contraction over the quarter.
"Health was the biggest reason the economy contracted as both the test and trace and vaccine programmes were wound down, while many retailers also had a tough quarter," said director of economic statistics Darren Morgan.
"These were partially offset by growth in hotels, bars, hairdressers and outdoor events across the quarter, partly as a result of people celebrating the Platinum Jubilee."
Chancellor of the Exchequer Nadhim Zahawi said: "Our economy showed incredible resilience following the pandemic and I am confident we can pull through these global challenges again.
"I know that times are tough and people will be concerned about rising prices and slowing growth, and that's why I'm determined to work with the Bank of England to get inflation under control and grow the economy.
"The Government is providing billions of pounds of help for households with rising costs, including £1,200 for eight million of the most vulnerable households."
But on Thursday Mr Zahawi and Prime Minister Boris Johnson refused to take any fiscal action after meeting with bosses of the UK's biggest energy companies.
British Chambers of Commerce head of research David Bharier warned that businesses are also being hit by these growing costs.
"Since 2021, our research has been flagging the damaging impact of inflation, it is wiping out many firms' profit margins and threatening their long-term growth," he said.
"Supply constraints caused by global Covid lockdowns and conflict in Ukraine, coupled with soaring energy costs, have created a perfect storm that many small businesses are struggling to weather."
He added: "That's why it is becoming critical for the Government to take action as soon as possible. They must immediately cut the VAT on businesses' fuel bills to five per cent. The longer the economy is left to drift towards the danger zone the harder it will be to rectify."