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UK economy flatlined in February due to strike action

Teacher's Strike

Strike action sees UK economy flatline in February

The UK economy saw no growth in February as a result of the effects of strike action by public sector workers.

The Office for National Statistics (ONS) said that increased building activity had been negated by teacher and civil servant walkouts.

The stagnation comes after a 0.4 percent increase in economic growth in January.

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Despite February's flat result, the chancellor stated the economy was "brighter than expected" and that the UK was "on track to avoid recession."

Jeremy Hunt said GDP, a measure of economic growth, increased by 0.1 percent in the three months ending in February.

Due to revisions to earlier data, the ONS now predicts monthly GDP to be 0.3 percent higher than pre-Covid levels in February 2020. The prior estimate in January was 0.2 percent below that level.

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Labour said the UK was "lagging behind on the global stage with growth on the floor".

Shadow chancellor Rachel Reeves said "The reality of growth inching along is families worse off, high streets in decline and a weaker economy that leaves us vulnerable to shocks,".

Darren Morgan, ONS director of economic statistics, said the UK construction sector had grown strongly in February after a poor January, with more repair work taking place.

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There was also a boost from retailing, with many shops having "a buoyant month".

But he said: "These were offset by the effects of civil service and teachers' strike action, which impacted the public sector, and unseasonably mild weather led to falls in the use of electricity and gas."

Teachers' walkouts across the country on February 1 and in some parts of England on February 28 were the biggest drag on growth, according to the ONS.

When schools close or have a skeleton staff due to strike action, it is assumed that the education sector's output, as measured by the ONS, decreases in terms of its contribution to GDP.

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Many civil officials went on strike on February 1st, affecting output.

Economic growth rates can vary dramatically from month to month, and experts are wary of reading too much into a single set of data.

Mr. Morgan said the economy has been "pretty much flat" since last spring.

High energy prices and rising interest rates to curb inflation are having an impact, as well as the strike action.

The International Monetary Fund warned on Wednesday the United Kingdom is on track to be one of the world's worst-performing major economies this year, contracting by 0.3 percent in 2023.

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Inflation in the United Kingdom was 10.4 percent in the year to February, remaining at a 40-year high.

However, many analysts anticipate inflation - the pace at which prices rise - will slow later this year as energy and food costs decline.

Recent estimates indicate the economic situation is not as dire as it appeared a few months ago.

But for many consumers and businesses, price rises are leading to a daily struggle to pay bills and buy food.

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Yael Selfin, chief economist at KPMG UK, said the economy was "likely to escape recession but a period of stagnation awaits".

"Economic activity will remain subdued in the near term as households continue to be squeezed by elevated prices and the cumulative impact of past interest rate increases," she said.

Capital Economics agreed the UK had "probably avoided recession" but said more interest rate rises were likely as the Bank of England fights to get inflation under control.

The Bank has raised rates progressively since December 2021, most recently from 4 percent to 4.25 percent in March.

SourceBBC

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