“While there was no growth in April, it’s important to focus on the broader trend”
The UK economy did not grow in April, official data released last Wednesday by the Office for National Statistics (ONS) revealed. The headline figure followed a month of wet weather, with ONS suggesting that the rain might have affected consumer spending.
More positively, the services sector belied the trend and grew by 0.2%, a fourth consecutive monthly increase. Furthermore, real gross domestic product (GDP) rose by 0.7% in the three months to April, compared with the previous quarter.
Growth in the first three months of 2024 had helped the UK economy exit recession. David Bharier, Head of Research at the British Chambers of Commerce (BCC), commented, “While there was no growth in April, it’s important to focus on the broader trend, rather than volatile monthly movements. Growth of 0.7% in the three months to April is positive news.
He continued, “While the broader trend is ticking up, downside risks remain. Many businesses we speak to are still held back by skills shortages, high borrowing costs and trade barriers with the EU. Sectoral performance remains very imbalanced, with retail and hospitality sectors consistently reporting weaker growth.”
Mortgage arrears rise for UK borrowers
The UK’s total value of outstanding mortgage balances with arrears rose again in Q1 to reach its highest level since 2014, according to Bank of England (BoE) data released last week.
The value of outstanding mortgage balances with arrears rose by 4.2% in Q1 2024. On an annual basis, this put total arrears 44.5% higher than a year earlier.
The BoE’s Mortgage Lenders and Administrators Statistics revealed that the total value of outstanding mortgage balances with arrears is now £21.3bn. Many analysts maintain a positive tone, pointing to expected upcoming cuts to Bank Rate, which could ease the pressure on borrowers.
More UK adults are ‘economically inactive’
ONS data showed the number of working-age adults considered economically inactive reached a nine-year high of 2.8 million, with 22% of adults aged 16 to 64 not actively looking for work. Since surging during the pandemic, the UK’s inactivity rate among adults has remained persistently high in the past two years.
Meanwhile, the official unemployment rate confounded analysts by unexpectedly rising to 4.4% in the three months to April, its highest level for two and a half years. Conversely, as unemployment rose, the number of job vacancies fell by 9,000 to 904,000.
And on the campaign trail…
The major parties published their manifestos last week, outlining their intentions for the UK should they be elected on 4 July.
Sir Ed Davey launched the Liberal Democrat manifesto entitled, ‘For a Fair Deal,’ with the NHS a key focal point. Pledges included giving unpaid carers the right to paid carers’ leave from work and providing 8,000 more GPs in England. Economic pledges from the party included reforming Capital Gains Tax (CGT), reversing banking sector tax cuts and raising the tax-free Personal Allowance.
Rishi Sunak set out his ‘Clear plan, bold action, secure future’ manifesto pledging £17bn worth of tax cuts, to be funded by clamping down on tax avoidance and tempering welfare spending. Headline announcements included abolishing National Insurance (NI) contributions for the self-employed, along with a further two percentage point cut in employee NI contributions by 2027, plans to abolish Stamp Duty for first-time buyers on homes up to the value of £425,000 and the construction of 1.6 million new homes. The manifesto also confirmed proposals already announced during the campaign, including National Service, the State Pension triple lock and plans to halve immigration.
The Labour Party’s manifesto placed wealth creation as their “number one priority,” according to Sir Keir Starmer, who announced intentions to recruit 6,500 new teachers, launch a new ‘Border Security Command’ to tackle immigration and plans to build 1.5 million new homes. Their manifesto promised no changes to personal tax rates, explaining its plans would be funded by charging VAT on private school fees, abolishing the non-dom tax status, increasing Stamp Duty for foreign buyers and clamping down on those who are underpaying tax by closing ‘loopholes’ in the windfall tax on oil and gas firms.
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All details are correct at time of writing (19 June 2024)
