UK economy shrunk by worse-than-expected 0.3% in April, ONS reveals, in bitter blow to Rachel Reeves
The UK economy shrank by 0.3% in April, it was revealed on Thursday, in a blow to Chancellor Rachel Reeves as her spending review comes under growing scrutiny.
The latest GDP figures revealed by the Office for National Statistics is worse than the 0.1% fall expected by economists.
Responding to the news, Ms Reeves acknowledged they were 'clearly disappointing' but insisted her spending review, delivered to MPs on Wednesday, would help deliver growth.
The Chancellor said: 'Our number one mission is delivering growth to put more money in people's pockets through our Plan for Change, and while these numbers are clearly disappointing, I'm determined to deliver on that mission.
'In yesterday's spending review we set out how we'll deliver jobs and growth - whether that's improving city region transport, a record investment in affordable homes or funding Sizewell C nuclear power station. We're investing in Britain's renewal to make working people better off.'
Speaking on Sky News, the Chancellor admitted April was a 'challenging month' but said the data was 'perhaps not entirely unexpected' given uncertainty around tariffs.
Breaking news. This article is being updated.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
an hour ago
- Yahoo
Why the Fed and ECB are no longer on the same page
The Federal Reserve on Wednesday is widely expected to hold interest rates steady for the fourth meeting in a row, while the European Central Bank just lowered its rates for the eighth time in a year. The divide has caught the attention of President Trump, who has seized on the gap as he pushes the Fed to lower rates by a full percentage point. He did so again last week as he called central bank chairman Jerome Powell a "numbskull" who has refused to ease policy despite Europe dropping its rates "10 times." "We've done none," Trump added. "Nobody understands.' The two central banks in the US and Europe have diverged as their respective economies move in different directions, impacted not just by tariffs from the Trump administration but other domestic factors. Earlier this month the ECB cut its benchmark interest rate to 2% from 2.25%, the lowest level since early 2023, leaving borrowing costs now more than 2 percentage points lower in Europe than the US. It also signaled it is nearing the end of its rate-cutting cycle. The Fed last cut rates in December 2024, reaching a target range of 4.25%-4.5%, and has yet to cut rates during Trump's second term in office. Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments 'The president is going to keep getting more and more upset about it,' said Wilmington Trust chief economist Luke Tilley. Perhaps the major difference is how the two central banks are viewing inflation. Policymakers in the US hiked their inflation forecasts in the spring as they worried about the ultimate impact of Trump's tariffs on prices — even though the higher expected prices haven't arrived yet. The Fed will offer new forecasts this coming week. In Europe, by contrast, the ECB has been cutting its inflation forecasts and now expects inflation to fall to its target of 2% this year before falling further to 1.6% next year. 'The European Union is cutting because inflation is low and there's a threat to growth," Tilley said. "I say the Fed either should be or will be cutting because inflation is low and there's a threat to growth, but they're holding on a little bit here.' Jeffrey Roach, chief economist for LPL Financial, said the Fed is more likely to remain in 'wait-and-see' mode than the ECB because US consumers are on stronger footing than their European counterparts, giving the Fed the luxury of time before US policymakers have to act. "Relatively stronger consumer demand means US inflation is running a bit hotter than the Euro area," said Roach. "As growth prospects look weaker in the Euro area, the ECB is becoming more dovish as they respond to economic pressures in Europe." ECB president Christine Lagarde has warned that trade tensions could lead to greater volatility and risk aversion in financial markets, which could weigh on demand in Europe and would also act to lower inflation. Most exports to the US face a 10% tariff, and levies could rise to 50% if the European Union and the US don't reach a deal by the White House's July 9 deadline. A fragmentation of global supply chains could also raise inflation by pushing up import prices and adding to capacity constraints in the domestic economy, Lagarde added. Unlike the US, Europe's central bank does not have a dual mandate. The ECB only targets inflation, while the Fed has to maintain both stable prices and maximum employment. Fed Chair Jerome Powell and many of his colleagues this year have repeatedly urged caution and patience on rates, saying they expect Trump's tariffs to push inflation higher and drag down growth, putting the Fed in a challenging spot. But a divide is emerging within the Fed about whether to hold rates steady for some time or get more comfortable about cuts later this year as officials try to determine whether any inflation coming from Trump's tariffs will prove to be longer-lasting. Some policymakers are arguing for "looking through" the impact of the duties as temporary, a stance that would leave the door open for cuts. Many on the rate-setting committee, however, believe there is a risk that inflation from tariffs could become more persistent. 'If we had a good Fed chairman, you would lower rates,' Trump told reporters earlier this week. 'And you know what? If inflation happened in a year from now or two years, let them raise rates.' The president stressed that the US has a lot of debt coming due and lower rates would mean lower interest expense for the US. 'If this guy would lower rates, we get a lower interest rate. It's unbelievable,' said Trump. 'And he's worried about inflation.' The World Bank warned this week that heightened trade tensions and policy uncertainty are expected to drive global growth down to 2.3 percent this year, nearly half a percentage point lower than the rate that had been expected at the start of the year and the slowest pace since 2008 outside of outright global recessions. The international body said turmoil has resulted in growth forecasts being cut in nearly 70% of all economies — across all regions and income groups. However, a global recession is not expected. Dustin Reid, chief strategist for fixed income at Mackenzie Investments, which has $150 billion in assets under management, said he thinks "the ECB may need to go a bit lower" with its rates. "Tariffs are going to be quite challenging for the European Union,' said Reid. On the Fed side, Reid thinks September is in play for a Fed rate cut. 'I do think the labor market data in the US is cracking a bit,' said Reid, adding that he 'would not be surprised" if Powell this coming week keeps "a little bit of an open door [to] at least keep July in play.' Click here for in-depth analysis of the latest stock market news and events moving stock prices
Yahoo
an hour ago
- Yahoo
Ukraine warns against drop in aid due to Israel-Iran escalation
Ukraine said on Saturday it hoped the military escalation between Israel and Iran would not lead to a drop in aid to Kyiv, at a time when European support is stalling without US engagement. Israel unleashed large-scale attacks on Iran on Friday, targeting nuclear and military facilities, high-ranking generals and atomic scientists. Iran in return launched barrages of drones and missile at Israel. The escalation sparked international calls for restraint as fears of broader conflict grow. In Kyiv it also sparked anxiety about future supplies of military aid, fearing Washington might relocate more resources to beef up the defence of its close ally Israel. "We would like to see aid to Ukraine not decrease because of this," President Volodymyr Zelensky said. "Last time, this was a factor that slowed down aid to Ukraine." The Ukrainian leader warned that Europe's support was already stalling without Washington's engagement. "Europe has not yet decided for itself what it will do with Ukraine if America is not there," he said. The return to the White House of US President Donald Trump has upended the West's provision of aid to Kyiv. It has left Europe scrambling to work out how it can fill any gap in supplies if Trump decides to pull US military, financial and intelligence support. Zelensky urged the United States to "shift tone" in its dialogue with Russia, saying it was "too warm" and would not help to end the war. Trump has sought rapprochement with Moscow and held three phone calls with Russian counterpart Vladimir Putin so far this year. He has stunned NATO allies with the stark change in policy from that of the previous US administration, which aborted almost all contacts with Moscow after Russia invaded Ukraine. The Israeli attacks on Iran also drove oil prices up, which Zelensky said would benefit Russia. "The attacks led to a sharp rise in oil prices. This is bad for us," he added, reiterating a call for the West to introduce price caps on Russian oil exports. The Ukrainian leader said he hoped to raise the issue of price caps at a possible meeting with Trump in the near future. He added, however, that the Israeli strikes might prove favourable for Kyiv if they lead to a drop in Iranian supplies of military equipment to Russia, which has relied heavily on Iranian-made attack drones. - More soldiers return home - Ukraine and Russia exchanged prisoners on Saturday, the fourth such swap this week, under agreements clinched in Istanbul earlier this month. Kyiv also said it had stopped Russian advances in the northeastern Sumy region. The deals to hand over killed soldiers and exchange captured ones are the only agreements to have come out of two rounds of peace talks in Istanbul. Russia has rejected calls to halt its three-year invasion. It has demanded Ukraine cede even more territory and renounce Western military support if it wants peace. Since Russia invaded in February 2022, the war has forced millions of people to flee their homes as towns and cities across eastern Ukraine have been flattened by heavy bombardments. As part of the Istanbul agreements, Kyiv also said it had received another 1,200 unidentified bodies from Russia. It said Moscow had said they were those of "Ukrainian citizens, including military personnel" Ukraine did not say whether it returned any bodies to Russia. Meanwhile, Russia intensified its offensive along the front line, especially in the northeastern Sumy region, where it seeks to establish a "buffer zone". This zone is designed, ostensibly, to protect the Russian border region of Kursk, previously partly occupied by Ukraine. Zelensky said Russia's advance on Sumy was stopped and that Kyiv's forces had managed to retake one village. He said 53,000 men Russian soldiers were involved in the Sumy operation. bur-asy/gil
Yahoo
an hour ago
- Yahoo
Zelenskyy: Putin will deceive Trump in peace talks and the whole world will see it
President Volodymyr Zelenskyy has stated that negotiations between the United States and Russia should not address Ukraine without its involvement. Source: Zelenskyy's interview with US television channel Newsmax, as reported by European Pravda Details: Zelenskyy acknowledged he cannot dictate how the US conducts dialogue with Russia. Quote: "But I believe Putin does not want to end the war and, ultimately, he will deceive Trump. You will see it – everyone, the whole world will see it. He's that kind of man. He is only ready for steps towards de-escalation if he faces strong pressure. There is no other way." More details: Zelenskyy stressed it is unjust to discuss Ukraine in such talks without its participation. Quote: "I think it's wrong to talk about Ukraine without Ukraine, to address Ukraine's issues and resolve them without us – I think it's unfair," he said. Background: Zelenskyy recently noted that US President Donald Trump has the leverage to end the Russia-Ukraine war but must understand the tactics of Kremlin leader Vladimir Putin. The current US administration is known to engage in talks with Russia while encouraging Kyiv and Moscow to pursue direct negotiations without US involvement. Support Ukrainska Pravda on Patreon!
