According to data released by the Office for National Statistics, UK GDP grew by 0.1% in February 2022. This marks a slowdown in the monthly rate of growth, after January’s uptick of 0.8%. On an annual basis, GDP was up by 9.5% in February, with this growth rate being supported by the low base witnessed in early 2021 due to the third national lockdown. The slight growth witnessed in February takes output further above pre-pandemic levels. GDP now stands 1.5% above the value seen in February 2020. 

Of the main sectoral groupings, services was the key to February’s growth, showing a month-on-month uptick in output of 0.2%. Accommodation and food services was the largest contributor to the growth of the overall services sector, with output picking up by 8.6% month-on-month. This growth was partially driven by an improving tourism outlook, with test upon entry requirements now scrapped for arrivals into the UK, subject to passengers’ vaccination statuses. There was also a general bounceback from weaker performance in December and January, when the spread of the Omicron variant had limited consumer activity in the sector. While the services sector showed growth in February, the other main sectoral groupings both recorded monthly contractions. Production output fell by 0.6% in February, driven by continued supply chain disruptions, while construction slipped by 0.1%, with adverse weather conditions during the month being a key factor. 

Cebr says slowdown has taken more negative tone

February’s slowdown in growth aligns with Cebr’s (Centre for Economic and Business Research) outlook for the economy across 2022 as a whole. Though output was always set to show slower growth in 2022 than 2021 due to differing base effects, the expected slowdown, Cebr asserts, has now taken on a more negative tone due to several emerging trends within the economy. Amongst these are the emerging cost-of-living crisis and the impacts of the conflict in Ukraine. For the former, the combination of rising inflation and slowing wage growth means that real spending power is set to reduce significantly, putting downward pressure on the consumption element of GDP. The conflict in Ukraine feeds into these consumer impacts, notably through the increased price of oil and other commodities, while also impacting the UK economy through supply chain disruption and general uncertainty.

Overall, Cebr expects GDP to grow by just 3.1% in 2022, following an expansion of 7.4% in 2021. The slowdown in consumption growth as a result of the cost-of-living crisis is also evident in our forecasts, with consumption forecasted to grow by just 4.3% in 2022, following an expansion of 6.2% in 2021. On a sectoral basis, the growth slowdown is set to be most stark amongst construction, amounting to a slowdown of 10.8 percentage points.