Commenting on the latest ONS UK GDP figures published today, which show a 0.3% contraction for April 2022, David Bharier, Head of Research at the British Chambers of Commerce (BCC), said: “The fall of 0.3% in April, following a 0.2% decrease in March, highlights the increasing stress the UK economy is under. All main sectors have seen a fall in growth, the first time since January 2021. “This decline is the inevitable outcome of surging inflation, supply chain disruption and widespread skills shortages. “Businesses from all sectors are facing unprecedented rises in raw material costs, soaring energy bills, and wage pressures. The introduction of an increase to employer National Insurance Contributions in April has only further added to firms’ woes. “This declining output comes off the back of two years of significant damage sustained by small businesses, whose weakened cash positions mean that they are in a far worse position to stomach further pressure. The global aspects to all these problems mean they are likely to weigh heavily on the UK’s prospects for growth for some time. “Output in consumer-facing services increased by 2.6% in the month, reflecting increased consumer spend on hairdressing and food services. However, the sector remains below pre-pandemic levels, highlighting the significant damage sustained from shutdowns and restrictions. “Declining business investment remains a serious cause for concern and urgent Government action is needed to halt this fall. Cutting VAT on businesses’ energy bills to 5% would ease the squeeze on firms’ cashflow and give them some room for manoeuvre.” Responding to the latest ONS Trade figures released today, William Bain, Head of Trade Policy, said: “It is heartening to see an increase in the rate of exports to the EU and the rest of the world. Nevertheless, continued progress is needed to meet the Office of Budget Responsibility’s (OBR) forecast of a net increase in UK exports of 9% across the whole of 2022. “On exports to the EU, the welcome increase of 8.8% since March is driven mainly by fuels and, to an extent, by machinery and transport equipment, but exports to the EU in chemicals, food and material manufactures remain flat. “On the import side, there are early signals on the potential for delays, due to COVID outbreaks centred around major ports in China, which may impact the flow of certain goods into the UK.” Trade data overview Exports UK goods exports accelerated in April 2022 with increases in exports to the EU rising by 8.1% (£1.2bn) and to the rest of the world by 6.5% (£0.9bn). Main factors in increased goods exports to the EU were machinery, transport equipment and fuels (gas and crude oil). Food, chemicals and material manufactures exports to the EU remained flat in April 2022. OBR forecasts for U.K. export growth in 2022 were 9% and 7% in imports. Imports Imports of goods from the EU rose by 4.2% in April driven by increases in machinery, transport equipment and chemicals, but from the rest of the world fell by 2.6% – an overall rise in goods imports of 0.7%. There was a reduction in cars, electrical machinery and other manufactured goods from China. Trends Comparing the 3 months to April 2022 with the 3 months to January 2022, goods exports to the EU increased by 15% and to the rest of the world by 2.7% – an overall rise of 8.8%. This is line with OBR forecasts from last autumn for export growth (so far) in 2022. Comparing the 2022 data with that in 2018 – the last stable period before EU exit and changes in methodology – exports were 6.1% higher in the 3 months to April 2022 compared with the 3 months to April 2018. Early estimates for services exports in Q1 2022 reveal a very modest increase of £0.1bn in that period. The overall UK trade deficit widened to £21.4bn (ex-inflation) in the three months to April 2022. Commenting on the latest ONS Labour Market statistics released today, BCC Head of People Policy, Jane Gratton, said: “An increasingly tight labour market means it’s much harder for employers to fill job vacancies – impacting on their ability to operate normally and retain skills in the business. “The further rise in the employment rate, together with drop in the unemployment rate are good news but they also reflect how little room for manoeuvre there is for unfilled vacancies on the ground. “With a new record set for the number of vacancies, and no easy way to fill them for many companies, labour shortages are likely to continue to damage the UK’s growth prospects. “Despite recruitment difficulties, the damage to firms’ finances from soaring inflation and rising national insurance will limit the extent to which wages can continue rising. “We need to find ways to bring people back into the UK labour market. Flexible working practices, rapid re-training opportunities and a focus on workplace health can support many economically inactive people to return to the workplace. “But for some roles, where there is clear evidence of a national shortage of skills and labour, firms need access to people, at all skill levels, from outside the UK. As well as issuing temporary and seasonal visas, the UK government needs to urgently review the Shortage Occupation List.”
