Britain’s GDP drops by 0.3 per cent as UK economy races towards contraction

Britain’s gross domestic product dropped by 0.3 per cent in August, after growth of 0.1 per cent in July 2022, the Office for National Statistics said this morning.

Experts had been expecting economic growth to flatline in August.

The latest data means the economy is on track to contract overall in the third quarter, with the ONS confirming there would need to be growth of more than 1 per cent in September to prevent a quarterly decline.

The ONS said there has been a continued slowing in three-month on three-month growth, with gross domestic product (GDP) falling by 0.3 per cent in the quarter to August.

Production fell by 1.8 per cent in August after a fall of 1.1 per cent in July and was the main contributor to the fall in GDP; this fall was mainly because of a decrease of 1.6 per cent in manufacturing.

Services fell by 0.1 per cent in August 2022, after growth of 0.3 per cent in July.

Human health and social work activities, and arts, entertainment and recreation activities fell by 1.3 per cent and 5 per cent respectively and were the largest contributors to the small fall in services in August, partially offset by growth of 1.2 per cent in professional, scientific and technical activities.

Chancellor response

Chancellor Kwasi Kwarteng said this morning: “Countries around the world are facing challenges right now, particularly as a result of high energy prices driven by Putin’s barbaric action in Ukraine.

“That is why this Government acted quickly to put in place a comprehensive plan to protect families and businesses from soaring energy bills this winter,” he added.

Kwarteng continued; “Our growth plan will address the challenges that we face with ambitious supply-side reforms and tax cuts, which will grow our economy, create more well-paid skilled jobs and, in turn, raise living standards for everyone.”

North Sea summer maintenance

Grant Fitzner, chief economist of the ONS, said: “The economy shrank in August with both production and services falling back, and with a small downward revision to July’s growth the economy contracted in the last three months as a whole.

“Oil and gas production fell as more scheduled North Sea summer maintenance took place than usual.

“Notable decreases were also seen across much of manufacturing.

“Health also contributed to the decline, with a drop in the number of hospital consultations and operations.”

He added: “Sports events too had a slower month after a strong July and many other consumer-facing services struggled with retail, hairdressers and hotels all faring relatively poorly.

“On the positive side, these falls were partially offset by stronger than usual summer performance from many professional services such as lawyers, accountants and architects.”