UK economy unexpectedly stalls in February on pay strikes

LONDON – The British economy stalled unexpectedly in February when strikes crippled public services but is still likely to perform better than the Bank of England expected.

Gross domestic product was unchanged from January, instead of eking out the 0.1 per cent growth analysts had expected, the Office for National Statistics (ONS) said on Thursday. The figure for January was revised higher to 0.4 per cent.

Together, the readings bring output in Britain further above its pre-pandemic level and suggest that the economy is unlikely to shrink in the first quarter. This further reduces the risk of a recession, but leaves the country on track for an extended period of stagnation.

“While a flat economy is not usually grounds for celebration, there are some encouraging signs in today’s data,” said Ms Kitty Ussher, chief economist at the Institute of Directors.

“Were it not for the industrial action that took place in the public sector, the economy overall would have grown.”

Assuming no revisions, the economy probably grew 0.1 per cent in the first quarter unless the figure for March shows a contraction of more than 0.2 per cent, the ONS said.

Chancellor of the Exchequer Jeremy Hunt said that

avoiding a recession

– largely a result of lower-than-expected energy prices – was a victory for Conservative party policy.

“The economic outlook is looking brighter than expected,” Mr Hunt said in a statement. “We are set to avoid recession, thanks to the steps we have taken through a massive package of cost-of-living support for families and radical reforms to boost the jobs market and business investment.”

Mr George Lagarias, chief economist at accountancy firm Mazars, said the lack of growth was “bad news” for Britain.

“Growth in the UK is stagnating and has fallen behind its developed market peers,” he said. “We expect the UK to continue to underperform the other G-7 (Group of Seven) economies for the time being. However, we acknowledge that the short-term global economic outlook has materially improved in the past couple of months.”

The weak February figures reflect the impact of widespread industrial action during the month. Services output fell 0.1 per cent, hit by walkouts by teachers and civil servants. Manufacturing, which economists had thought would deliver small growth, also showed no change in the month.

Strikes intensified during the month, with teachers in England staging a national walkout on Feb 1 in their dispute over pay and regional strikes on other days. Other action involved rail workers, university staff, nurses, paramedics and civil servants. BLOOMBERG