Economic growth slumps as cost-of-living crisis bites

The figure was markedly down on the 0.8% increase seen in January.

The ONS reported the hospitality and leisure sectors had experienced some growth thanks to Omicron infection numbers easing compared to December and January.

However there were slowdowns in construction industries as business confidence took a knock, with the cost-of-living crisis and high energy bills deterring investments.

GDP was also hit as Government spending on the NHS test and trace system and Covid-19 vaccination booster programme slowed in February.

The release of the figures coincided with the state pension and certain benefits rising by 3.1%, half the current inflation of 6.2%, with price rises expected to exceed 8% soon.

The basic state pension rises by £4.25 a week to £141.85 a week, with the full state pension going up £5.55 a week to £185.15.

The universal credit allowance for a single person over 25 rises from £324.84 to £334.91 a month, or £4,019 a year, and child benefit rises 68p a week for the eldest child.

Disability allowance is going up by 3.1% and will automatically change for recipients.

Economists warned the uplift was not enough to offset the cost-of-living crisis.

However Chancellor Rishi Sunak said he welcomed “the positive growth seen across the economy in February, which continues to recover from the pandemic”.

He said: “Russia’s invasion of Ukraine is creating additional economic uncertainty here in the UK, but it is right that we are responding robustly against Putin’s unprovoked invasion.

“We are supporting families with the cost of living with £22 billion of support this financial year, and building a high productivity, low tax economy, including through a tax cut worth up to £1,000 for half a million small businesses.”

But food bank providers said they were “deeply concerned about the scale of suffering” and warned they were themselves now struggling to keep up with “relentless demand”.

In a letter to the Prime Minister, the Independent Food Aid Network, a group of 550 food banks, urged the PM to fight “rapidly rising levels of poverty, destitution and hunger”.

They said: “An emergency supply of food cannot resolve someone’s financial crisis and will only act as a temporary sticking plaster. Measures must be urgently introduced to decisively increase people’s incomes through the social security system, emergency cash first support and wage increases combined with job security.”

The network said people were struggling as the price of food, energy and other essentials rose, while those on benefits were seeing a real-terms cut as inflation outstrips payments.

UK Liberal Democrat Treasury spokesperson Christine Jardine, the MP for Edinburgh West, said: "These figures show the economy is being hit hard as the cost of living crisis bites. 

“Instead of putting all his energy into protecting people and growing the economy, the Chancellor is in a fight for his political livelihood after this week’s scandalous revelations. 

"Hard-pressed families are facing no end of hardship with soaring energy bills and unfair tax hikes and Ministers are sitting on their hands as both people and the economy suffer.”

Suren Thiru, head of economics at the British Chambers of Commerce, said of the new GDP figures: “The significant slowdown in growth indicates that the UK economy was losing steam even before the impact of Russia’s invasion of Ukraine.

“Tourism-related industries and accommodation services recorded the strongest improvements in the month as the end of Plan B restrictions, and reduced concerns over Omicron, supported activity.

“However, this was mostly offset by a significant drop in NHS Test and Trace services and vaccine activity as well as declines in industrial and construction output.

“February’s slowdown is likely to be the start of a prolonged period of considerably weaker growth as rising inflation, surging energy bills and higher taxes increasingly damages key drivers of UK output, including consumer spending and business investment.”

Alpesh Paleja, Confederation of British Industry lead economist, added: “Following the bounce at the start of the year, it’s no surprise that economic growth slowed in February.

“Near-term challenges to the outlook have ramped up since, with a growing cost-of-living crunch set to weigh on growth.

“Businesses are also grappling with headwinds from the Ukraine conflict, which is exacerbating cost pressures and supply chain disruption.”

Separately, the ONS released a new set of figures caused by a change in how HM Revenue and Customs measures exports to the EU.

While the measure showed a 25.4% rise in goods exports to the EU in February compared to January, this was down 0.3% compared to December 2021 under the old system.

Exports to non-EU countries dropped 6.4% between January and February, the figures show. The UK’s trade deficit aso widened by £10.2 billion to £54.4bn in the three months to February.