The UK economy recorded marginal growth in the first quarter of the year but the cost of living crisis continued to drive a railroad through Britons’ financial resilience, while strikes in some sectors offset growth in others, according to the latest data from the Office for National Statistics (ONS).
The ONS said that UK gross domestic product (GDP) is estimated to have increased by an unrevised 0.1% in the first twelve weeks of 2023.
The slight uptick in growth meant that the UK narrowly avoided a recession at the beginning of the year.
The services sector grew by 0.1% on the quarter driven by increases in information and communication, and administrative and support service activities; elsewhere, the construction sector grew by a revised 0.4%, while the production sector grew by 0.1%, with a revised 0.6% growth in manufacturing.
But the cost of living crisis continued to bite into Britons’ wallets, delivering a blow to their financial resilience on two fronts. There was more evidence of people raiding their savings to stay afloat, as the household saving ratio dipped to 8.7% in the latest quarter down from 9.3% in the last quarter of 2022.
At the same time real households’ disposable income fell by 0.8% following positive growth of 1.3% in the fourth quarter of 2022.
Households experienced simultaneous withdrawals from their deposit accounts and negative secured loans for the first time ever, the ONS said.
Consumer behaviour proved to be downbeat in the quarter with consumer-facing services dragging overall growth down. The sector fell by a revised 0.3%, while all other services increased by 0.2%.
The largest positive contribution to growth was from the information and communication sub-sector, which grew by 1.3%, with increases in computer programming, consultancy and related activities, and telecommunications, the ONS said. The second largest positive contribution to growth was from administrative and support service activities, which increased 1.6%.
But strikes delivered hits to individual sectors that offset growth in other sectors. There were declines in health, transport and storage, education and public administration and defence, areas that saw industrial action take place across the quarter.
The ONS said that household expenditure rose by 1.3% on the quarter, as recent inflationary pressures increased the nominal value of this spending. The implied price of household expenditure increased by 9.5% when compared with Quarter 1 2022. This was an easing in inflationary pressures from the 10.3% in the year to Quarter 4 (Oct to Dec) 2022, although the rate of the price change in household expenditure is still high by historical standards, it said.
