Brexit triumph as UK GDP shows unexpected SURGE in 2022
UK economy delivers record growth in 2021 amid Covid rebound
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According to the latest data from the Office for National Statistics (ONS), the UK economy grew a staggering 0.8 percent in January, far outpacing post-Brexit forecasts. Across the board, all the main sectors of the economy showed growth – but with inflation soaring and the Ukraine war showing no signs of stopping, economists are warning of tougher times to come.
The latest ONS figures show that gross domestic product (GDP) grew by 0.8 percent month-on-month in January, after a 0.2 percent decline in December 2021 as the Omicron variant rattled markets.
City economists had forecast a growth rate of just 0.2 percent for January 2022, making this result four times higher than expected.
The expansion marks the strongest period of growth since last June, and shows the economy bounced back from Omicron far quicker than expected as people returned to pubs and restaurants.
The ONS said all areas of the economy enjoyed a return to growth in the early parts of the year, with wholesale, retail and recreation particularly strong drivers.
Overall, consumer-facing services enjoyed a strong uptick, reflecting public faith in the efficacy of Covid vaccines.
But it is not all good news. While growth looked likely to continue into February, economists warned of tougher times ahead.
Paul Dales, the chief UK economist at the consultancy Capital Economics, warned that the latest figures are probably going to be “as good as it gets for this year”.
He said: “The hit to households’ real disposable incomes from the surge in energy prices, the latest chunk of which is due to the war in Ukraine, and higher taxes will start to be felt from March and April.
“As such, GDP growth will probably slow throughout the year.”
And Suren Thiru, head of economics at the British Chambers of Commerce, said: “The figures have been pushed into the rear-view mirror by renewed domestic and global shocks, including Ukraine.
“The UK’s economy could stall in the near term as rising inflation, soaring energy bills and higher taxes increasingly drag on activity, despite a probable boost to output in February from the end of Plan B Covid restrictions.”
Chancellor of the Exchequer Rishi Sunak said the economy was in a “strong position”, but warned that vigilance was necessary in the face of the ongoing uncertainty surrounding the Russian invasion of Ukraine.
Mr Sunak acknowledged the uncertainty faced by households as the cost of living crisis bites and sanctions against Russia threaten further increasing energy costs.
He said: “We know that Russia’s invasion of Ukraine is creating significant economic uncertainty and we will continue to monitor its impact on the UK.
“But it is vital that we stand with the people of Ukraine to uphold our shared values of freedom and democracy and ensure Putin fails.
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Indeed, investors remained so focused on the conflict in Ukraine that the pound showed little reaction to the January growth figures.
Additionally, forecasters expect the soaring inflation to lead to a hike in interest rates by Bank of England policymakers this week – the third such rise in three months if it manifests.
The British Chambers of Commerce (BCC) warned this could prove to be a mistake.
BCC head of economics Suren Thiru said: “Raising interest rates and taxes at this time would weaken the UK’s growth prospects further, by undermining confidence and diminishing households’ and firms’ finances.”
Elsewhere in data released by the ONS last week, it emerged that Britain’s trade deficit with the EU rose sharply, but ONS researchers said this was a one-off effect related to the way EU trade data is collected post-Brexit.
Around £2billion of a £3billion pound fall in goods exports to the EU in January was related to this, the ONS said, and therefore cannot be used as an accurate measure.
However, HMRC officials said a £4.7billion rise in imports from the EU was “predominantly” the result of a genuine shift, such as a £2billion pound rise in imports of cars, due to reduced domestic production.
This figure puts imports from EU countries on par with non-EU nations, as the Brexit transition wobble appears to smooth.
Trade with non-EU countries was little changed from December.
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