Economy shrinks by 0.1% as inflation battle rages and recession fears grow
12 August 2022, 07:15 | Updated: 12 August 2022, 08:06
The UK economy shrank by 0.1% between April and June after growing in the first three months of the year, official figures show.
Analysts say the decrease was mainly down to the test and trace and vaccine programmes being wound down - but many retailers also had a tough quarter.
The figures come as the UK continues to grapple with inflation, and the Bank of England has forecast that we will plummet into a recession towards the end of this year.
The downturn is expected to last for the entirety of next year.
Commenting on the 0.1% contraction, the Office for National Statistics (ONS) director of economic statistics Darren Morgan said: "With May's growth revised down a little and June showing a notable fall, overall the economy shrank slightly in the second 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.
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"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 Nadhim Zahawi said the economy showed "incredible resilience" following the pandemic and he is "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," he said.
"The Government is providing billions of pounds of help for households with rising costs, including £1200 for eight million of the most vulnerable households.”
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Yael Selfin, chief economist at KPMG UK, said that despite the economy shrinking in the second quarter, it is "too early to call a recession".
A recession is a period with a significant decline in economic activity characterised by falling GDP, rising unemployment and a decline in real incomes.
It is defined as the economy getting smaller for two consecutive three-month periods.
In the first three months of 2022, the UK economy grew by 0.8% before shrinking between April and June.
