UK economy stagnates in February

The UK economy stagnated in February as strikes dented productivity, according to figures released on Thursday by the Office for National Statistics.

There was zero growth, compared to 0.4% growth in January and versus expectations of a 0.1% increase. January’s growth was revised up from 0.3%.

Falls in services and production were offset by growth in construction.

The services sector fell by 0.1% following 0.7% growth the month before. The ONS said the biggest contributor to the negative growth in services was education, which fell 1.7% due to teacher strikes. This followed 2.5% growth in January.

Public administration - which was also hit by strikes - was the second largest contributor, falling by 1.1% in February.

Production output fell by 0.2% in February following a 0.5% drop the month before, but construction output rose 2.4% following a 1.7% decline in January.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Looking ahead, we continue to expect GDP to be broadly flat again in Q2. Admittedly, households’ real disposable incomes likely will rise by almost 1% quarter-on-quarter in Q2, primarily due to a sharp increase in the value of benefits in April. But some households will prioritise rebuilding the savings buffer that they have run down over the last year, while others will step up debt repayments in response to the rise in interest rates, ensuring that real expenditure rises only marginally.

"Meanwhile, business investment and residential investment look set to fall sharply in Q2, in response to the jump in interest rates and government policies, such as the end of the super-deduction for capital investment and the phasing out of the Help to Buy Scheme in Q1. GDP also will be depressed again in Q2 by ongoing strikes in the health and education sectors. Accordingly, we are sticking to our forecast for a 0.1% quarter-on-quarter decline in GDP in Q2."