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His economy unexpectedly contracted in March, raising the specter of a full-blown recession later this year due to soaring costs of living.

According to the Office for National Statistics, UK GDP fell 0.1% on the month as families worried about a sharp drop in spending and consumer confidence.

It comes as Boris Johnson and Rishi Sunak appear to be loosening their opposition to imposing taxes on giant energy companies to help poorer households cope with their bills. The unexpected inversion of March GDP means output grew by just 0.8% in the first three months of the year despite the lifting of most of the remaining Covid restrictions in February.

Russia’s invasion of Ukraine and the ensuing spike in energy and food bills quickly set aside the post-pandemic trend.

The drop in GDP spooked the City, which had been expecting a small gain, and the FTSE-100 Index of top corporate stocks fell 161.2 points or 2.2% to 7,186. 5 at the beginning of the trading session.

The pound also plunged, sliding to a two-year low against the dollar at one stage and a seven-month low against the euro.

Prime Minister Sunak said: “The UK economy recovered quickly from the worst of the pandemic and our growth in the first few months of the year was strong, faster than the US, Germany and Italy. but I know this is still a time of anxiety.

“Our recovery has been disrupted by Putin’s barbaric invasion of Ukraine and other global challenges, but we are continuing to help people where we can.”

But City economists said underlying GDP trends were “disturbingly weak” and warned of a growing recession risk – two straight quarters of negative growth – throughout the spring and summer. summer.

“It now looks like GDP will fall in the second quarter,” said Paul Dales, chief UK economist at Capital Economics. And with the full impact of the cost-of-living crisis yet to be felt, the likelihood of a recession increases. Even so, with price pressures still mounting, the Bank of England may have no choice but to further plague households by raising interest rates further.” Analysis of the figures showed retail and car sales were the hardest hit, with output falling 2.8%.

Overall, the dominant service sector, which accounts for 80% of GDP, shrank 0.2% on the month. Manufacturing, including manufacturing, also fell 0.2 percent while construction rose 1.7 percent.

Consumers are facing the biggest cut in real income since the 1950s as inflation rapidly outstrips wage growth. Next week’s inflation figures from the ONS are expected to show the Consumer Price Index surpassed 8% in April for the first time in more than 30 years. The boss of John Lewis today became the industry’s latest captain to call for urgent action on the scale of the response before energy bills rise further in the fall.

Speaking on ITV’s Peston programme, Dame Sharon White said: “I think action needs to be taken before the summer… I think the Government has done a great job with the speed and scale over the duration of it. Covid, I think we need to see the same decisive action taken at speed and at speed. “

In a radio interview this morning, the Prime Minister repeatedly stopped short of making tax decisions on giant energy corporations.

It comes after Bernard Looney, chief executive officer of BP, said its investment plans would not be affected by a wind tax. Mr Johnson is serving as Cabinet chairman in Stoke-on-Trent as the Government seeks to cut bureaucratic burdens such as the cost of passports and driver’s licenses. He is under increasing pressure to impose a wind tax to pay for relief measures for millions of people struggling financially.

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