UK economy proving more robust than expected, but GDP fell by 0.3% in March

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The UK’s gross domestic product (GDP) continued its recent flatlining trajectory over the first three months of 2023, with reasons for both gloom and optimism.

For the more upbeat observers, the ‘headline’ of 2023’s first quarter will be that the UK has continued to narrowly avoid recession into this year, recording 0.1% growth in its economy over those three months.

However, the 0.3% decline recorded for GDP in March raises the question of whether it marks the start of a sustained downward slide.

It will become much easier to answer that question in mid-June, when the April GDP estimate is set to be released.

So, should businesses be feeling hopeful, or dreading the coming months?

There is no question that for many organisations up and down the UK – including some that are struggling to survive, never mind achieve sustained growth – these are exceedingly challenging times.

Indeed, the extent of that challenge has been underlined by stickier-than-expected double-digit inflation in the UK, which the Bank of England has sought to tackle by once again putting up interest rates; BoE announced on 11th May that the base rate would climb by a further 0.25% to reach 4.50%.

However, there might also be some tentative reasons for hope about the state of ‘UK plc’. As reported by LondonlovesBusiness on the morning the latest GDP figures were published, the FTSE 100 was steady, showing “modest progress”. Moreover, some key business figures have been quoted as taking a positive attitude towards the UK’s prospects for the months to come.

One of those was Shawbrook Bank enterprise head Neil Rudge, who said the bank was “still seeing lots of optimism. While traditional exits and M&A (mergers and acquisitions) activity has slowed, we’ve seen an increase in SMEs (small and medium-sized enterprises) seeking funding to fuel growth opportunities, which suggests business owners are confident.”

He added, however, that SMEs continued to face challenges “in terms of managing cash-flow, particularly in the shadows of the cost-of-living crisis, recruitment difficulties and cost of debt pressures”.

A mixed assessment of the situation was also forthcoming from Jonathan Moyes, head of investment research at investment service Wealth Club. He said that “whilst the data suggests the UK is performing far better than most expected last year, it remains a challenge to reconcile how the UK economy can escape a recession after such a steep rise in interest rates.”

Looking at the sector-by-sector picture, Mr Moyes pointed out that while strike action had affected the data for services, “manufacturing and construction are clearly pockets of strength. If confidence surveys are to be believed, there has been a notable uptick in services in April, which may give a boost [to] Q2 numbers.”

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The message from many well-qualified observers, it seems, is that while the UK economy has fared surprisingly well so far amid a difficult environment, it is far from guaranteed that this will remain the case.

But of course, irrespective of your own organisation’s situation right now, you will not want to be merely subject to external events; you will want to exert some control over your business’s prospects for the months and years to come.

Our know-how could go a long way to making that a reality for your business. So, whether you are on the lookout for leading VAT services in Plymouth, payroll solutions in Newton Abbot, or start-up help in Wellington, you are welcome to reach out to your nearest TS Partners office to learn more about how we could assist you in 2023 – and beyond.