Chancellor unable to say when UK economy will return to pre-pandemic levels

Recession fears have been eased but growth remains weak. Credit: PA

The chancellor has been unable to say when the UK economy will return to pre-pandemic levels on a quarterly basis, but insisted Germany is in the same boat.

Jeremy Hunt said the latest GDP (gross domestic product) assessment showed "much better figures than anyone would possibly have predicted even three months ago", after it was revealed by the Office for National Statistics (ONS) that the economy grew by 0.1% between January and March.

But the GDP report shows that the UK economy was still 0.5% smaller in the first quarter of this year than in the last quarter of 2019 – just before Covid-19 hit the global economy - and Mr Hunt could not say when it would return.

"It's for the economists to say when we are going to get our quarterly levels back to pre-pandemic levels but Germany is also in the same situation as we are," he said.

Jeremy Hunt is asked when the UK economy will return to pre-pandemic levels

Defending his government's work on the economy, he pointed out that the most up to date monthly figures "we are now above pandemic levels across the whole economy but only marginally".

"We want to see much faster growth and that's why we need to stick to our plan, above all to bring inflation down, because that's a drag on growth."

He added: "The bigger picture here is that growth is picking up much faster than anyone thought possible - that's encouraging - the International Monetary Fund who are here in Japan with me say the British economy is on the right track but there's still much to do."

Marginal growth in the UK came after a 0.3% decrease in March, driven by falls for the retail and wholesale sector while the healthcare sector was also impacted by strike action.

Economists had predicted flat growth in March and the 0.1% increase for the first quarter of 2023.

The ONS said growth during the whole quarter was impacted by industrial action. The decline in March came after a flat performance in February and 0.5% rise in January.

Mr Hunt said: “It’s good news that the economy is growing but to reach the government’s growth priority we need to stay focused on competitive taxes, labour supply and productivity.

The Bank of England Governor confirmed yesterday that the Budget has made an important start but we will keep going until the job is done and we have the high wage, high growth economy we need.”

Sir Keir Starmer has said the latest economic growth figures were "nothing to celebrate" after UK gross domestic product (GDP) increased by 0.1% between January and March.

Speaking to broadcasters during a visit to the Crick Institute in central London, the Labour leader said: "This is nothing to celebrate and is yet more low growth on the back of 13 years of low growth.

"I think the essential question many people today will be asking themselves is, 'Do I feel any better off now than I did 13 years ago when this government started?'

"I think the resounding answer to that around the country will be, 'No, I don't'."

ONS director of economic statistics Darren Morgan said: “Despite the UK economy contracting in March, GDP grew a little over the first quarter as a whole.

“The fall in March was driven by widespread decreases across the services sector.

“Despite the launch of new number plates, cars sales were low by historic standards – continuing the trend seen since the start of the pandemic – with warehousing, distribution and retail also having a poor month.”

Output in consumer facing services, such as retail, dropped by 0.8% in March compared to the same month last year.

Consumer spending has continued to come under pressure from significant rises in the cost of living over the past year, with inflation most recently reported at 10.1% in March.

The ONS also highlighted a knock to monthly GDP from the motor vehicle trade, IT and communication and the transport sector, which has faced further disruption from industrial action.

Jeremy Hunt shopping in Tokyo ahead of the G7 summit. Credit: HM Treasury

The latest figures came a day after the Bank of England said it no longer predicts the UK will enter a recession this year after upgrading its economic growth projections.

A technical recession is when the economy contracts for two consecutive quarters.

In February, the central bank’s Monetary Policy Committee believed the economy could fall into a shallow recession starting from the first three months of the year.

On Thursday, it said it expects GDP to rise by 0.25% this year before a 0.75% increase next year and the year after.

It came as the Bank also increased interest rates from 4.25% to 4.5% – the highest level since 2008.

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