The data will underline fears that the UK economy will contract in the second quarter of the year. Photograph: Bloomberg/GettyThe data will underline fears that the UK economy will contract in the second quarter of the year. Photograph: Bloomberg/GettyUK economy shrank by 0.1% in April as Iran war held back growthGDP hit by higher energy prices caused by Middle East conflict, after 3% rise in March
The UK economy contracted by 0.1% in April as the Iran war began to take its toll on growth, official figures show.
As energy prices have risen as a result of the conflict, after Iran closed off the strait of Hormuz – a vital shipping route for global trade – the UK’s strong expansion in the first quarter slid into reverse.
The fall in gross domestic product in April, which had been expected by economists, followed a 0.3% increase in March, according to the Office for National Statistics.
Global growth is slowing to lowest level since pandemic, says World BankRead moreThe data will underline fears that the UK economy will contract in the second quarter of the year.
The chancellor, Rachel Reeves, has sought to argue that the economy was strong as it entered the crisis and has criticised Donald Trump’s “folly” in unleashing the conflict.
Responding to the figures, she said: “Before the conflict in the Middle East, growth was higher than expected and inflation was falling. This is not a war we wanted or joined, but one that will have an impact at home.”
She added: “The choices I have made as chancellor mean our economy is in a stronger position to deal with the costs of the war, and we are getting on with the job of building a stronger and more secure economy.”
The GDP downturn in April was led by a 0.2% decline in services output, partly offset by a 0.1% rise in construction, the ONS said.
The drivers of weak services output included administration, and the arts, entertainment and recreation sector.
While construction output was up over the month, that “came solely from an increase in repair and maintenance”, it said, with new work down 0.3% – despite Labour’s promise to “get Britain building” and its pledge to get 1.5m new homes built.
Over the three months to April – a longer-term perspective that tends to be less volatile – GDP growth was 0.7%, the ONS said.
Most forecasters have significantly downgraded their expectations for leading economies this year, including the UK, as higher oil prices as a result of the Middle East conflict drive up inflation and hit growth.
Fergus Jimenez-England, an associate economist at the National Institute of Economic and Social Research, said: “We expect this slowdown to intensify as higher energy costs feed through the economy, with the impact likely to be felt most acutely in the third quarter as the energy price cap rises.”
Data on inflation and the jobs market due to be released next week will give a clearer picture on how the outbreak of the war has affected the economy, as the Bank of England prepares to decide whether to raise interest rates on Thursday.
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