Strike action contributes to 0.5% shrink in UK economy

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Peninsula Team, Peninsula Team

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The UK economy contracted by 0.5% in July, with falls in all three main sectors, according to data from the Office for National Statistics (ONS)

 GDP fell by 0.5% in July, following growth of 0.5% in the previous month, partly driven by strike action by NHS workers and teachers.

 Looking more broadly, GDP showed 0.2% growth in the three months to July, when compared with the three months to April 2023. This was largely driven by growth in the production sector, which saw a rise of 0.6%.

 For July, output in the services sector fell by 0.5% and was the largest contributor to the fall in monthly GDP. This was followed by production and construction output, which fell by 0.7% and 0.5%, respectively.

 This is the first month since June 2022 that all three sectors contributed negatively to GDP on the month.

 Darren Morgan, ONS director of economic statistics, said: ‘Our initial estimate for July shows that GDP fell, however, the broader picture looks more positive, with the economy growing across the services, production and construction sectors in the last three months.

 ‘In July, industrial action by healthcare workers and teachers negatively impacted services and it was a weaker month for construction and retail due to the poor weather. Manufacturing also fell back following its rebound from the effect of May’s extra bank holiday.’

 The main contributor to the fall in monthly services output was the human health and social work activities sub-sector, which fell by 2.1% in July 2023.

 This was attributed entirely to a 3.4% fall in the human health activities industry – with industrial action being held in July by NHS senior and junior doctors.

 The next largest contributor to the fall in services output in July 2023 was the 2.1% fall in information and communication, following on from three consecutive monthly growths in this sub-sector.

 Output in consumer-facing services showed no growth in July 2023, while all other services fell by 0.6%. The largest positive contributions to consumer-facing services in July 2023 came from the sports activities and amusement and recreation activities industry, up 12.4%.

 Wholesale and retail trade and repair of motor vehicles and motorcycles followed, showing a rise of 2.2%, respectively.

 David Bharier, head of research at the British Chambers of Commerce, said: ‘Today’s figure underling the precarious state of the economy. Small and medium-sized businesses continue to battle against stubbornly high inflation, rising interest rates, trade barriers with the EU, higher taxes, and an uncertain labour market.

 ‘Our latest quarterly economic forecast, published last week, expects GDP to flatline over the next two quarters, leading to 0.4% growth for this year. Longer-term growth is also expected to be less than 1% for 2024 and 2025.

 ‘Businesses need to see a clear framework from politicians, outlining how long-term investment can be unlocked, and economic growth accelerated.’

 For information on how strike action in the workplace, visit BrAInbox today where you can find answers to questions like Do employees get a day off when their child's school is closed because of teacher strikes?

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