Michael Simmons

It must be bittersweet being Rachel Reeves. Figures just released by the Office for National Statistics (ONS) show the economy grew by 0.5 per cent in February. That is significantly better than economists had expected and, coupled with the fact that January growth has been revised up, it marks probably the first piece of seriously good economic news for the Chancellor since she entered No. 11 Downing Street. Pretty much everything other than manufacturing saw improved performance and demand at the start of the year. Car sales, publishing and real estate helped drive services up by 0.5 per cent. Production grew too and even construction, which has been shrinking, saw one per cent month-on-month growth. The trouble is, of course, this is data from a different world.

Rachel Reeves lands in Washington tonight to be greeted with bad news. The International Monetary Fund (IMF) – whose spring meeting the Chancellor is attending – has just handed Britain the largest GDP downgrade of any G7 country.  In the freshly released update to their world economic outlook, the IMF forecast growth for the UK this year of just 0.8 per cent – down from the 1.3 per cent they’d previously projected. Things don’t get much better next year either, with just 1.3 per cent growth forecast, again downgraded from 1.5 per cent.  This downgrade singles out Britain and our European neighbours.

The Organisation for Economic Co-operation and Development (OECD) has just confirmed what we already knew: Britain will be hit harder than almost anywhere else by the economic fallout triggered by the war in Iran. Updated OECD forecasts released today slashed predictions of UK growth for this year to just 0.7 per cent from the 1.2 per cent previously expected. That’s a larger downgrade than any other G20 country. On inflation, the Washington-based organisation expects UK inflation to hit 4 per cent – the second highest in the G7. The causes are clear: an energy price hike, prolonged in nature, that simultaneously makes everything more expensive, reduces supply and destroys consumer demand. The result is even more stark: stagflation.

After a record tax take and surplus in January, normal service has resumed. Britain experienced its second-largest February borrowing splurge since records began, according to figures just released by the Office for National Statistics (ONS). Last month we borrowed some £14.3 billion, which was £2.2 billion more than a year before and the second highest figure for a February since records began in 1993. Tom Davies, senior statistician at the ONS, said: ‘While [tax] receipts were up last year, that was outweighed by a rise in spending.’ A large part of that jump in spending was our debt interest payments which, at £13 billion, was the highest ever recorded for February, as this rather striking graph shows: Some £4.

In a surprise to no one, the Bank of England’s Monetary Policy Committee (MPC) has voted nine-zero to hold interest rates at 3.75 per cent. The unanimous decision is the first time the MPC have been in complete agreement since September 2021. Before Trump and Israel’s bombs rained down on Iran, the markets had been overwhelmingly expecting a rate cut. This would have been welcome news for mortgage holders and the government. But with an energy price shock sending inflation expectations in the wrong direction, we are lucky the MPC didn’t hike rates this time. The markets are now expecting a rate hike towards the end of summer after inevitably higher energy prices lead to higher inflation.  Even before today’s announcement the mortgage market was feeling the pressure.

Figures just released by the Office for National Statistics (ONS) show the economy ground to a halt in January, with no growth recorded. That was despite economists and businesses reporting a brighter start to the year. Economists had expected January to see growth of 0.2 per cent. Over the three months to January we did see some growth, though just 0.2 per cent. Within that figure, services expanded 0.2 per cent while production grew 1.3 per cent. The positive numbers end there, however, with the construction sector contracting by 2 per cent. It’s unlikely things are going to get much better as the year goes on.