The UK economy shrank in April following declines in both the services and production sectors, in a month marked by volatile US tariff announcements and higher local taxes.

Britain's monthly gross domestic product fell 0.3% in April after rising 0.2% in March, according to data from the Office for National Statistics published Thursday. The latest figure is worse than the expected 0.1% decline, signaling the worst monthly drop in the UK GDP since October 2023.

Annually, the British economy grew 0.9%, slowing from the previous 1.1% expansion. In the quarter to April, UK GDP increased 0.7% compared with the three months ended January, with ONS Director of Economic Statistics Liz McKeown noting signs that "some activity may have been brought forward from April to earlier in the year."

According to ONS data, the economic contraction was largely driven by the 0.4% fall in services output, with nine out of 14 subsectors recording lower output. The downbeat reading reflects the slump in legal and real estate activities as transactions tumbled due to higher Stamp Duty Land Tax rates, which took effect in England and Northern Ireland on April 1. Advertising and market research also made a downward contribution to the sector during the month.

The production sector, meanwhile, logged a 0.6% decrease in output, mainly due to the manufacturing industries and the electricity, gas, steam and air conditioning supply segment. For the manufacturing sector, the biggest downward contribution was from the transport equipment segment, amid lower output in the manufacturing of motor vehicles, trailers and semi-trailers.

In contrast, Britain's construction output jumped 0.9% month over month and 3.3% on an annual basis. The sector's monthly performance benefited from a rise in new work and repair and maintenance, particularly in infrastructure and private housing.

"The combination of apparent seasonality in the data, a cooling jobs market and uncertainty about the global economy suggests growth will slow materially for the remainder of the year," ING said. "April's disappointing GDP figure sets up growth of 0.1-0.2% through the second quarter, down from the eyebrow-raising 0.7% seen in the first."

Source : MT Newswires