The UK’s GDP shrunk by 0.1% in March, new figures published by the Office for National Statistics (ONS) have confirmed.

This follows a month of no growth in February, after the ONS revised its GDP calculation down from 0.1% growth.

The services sector fell by 0.2% on the month and was the main contributor to March’s fall in GDP. Production also fell on the month by 0.2%, although the data showed that these falls were partially offset by construction, which grew by 1.7%.

Monthly GDP is now 1.2% above its pre-pandemic level from February 2020, the ONS revealed, with services 1.5% above its pre-COVID level, construction 3.7% above and production 1.6% below.

Within the services sector, consumer-facing services were 6.8% below their pre-pandemic levels in March 2022, while all other services were 3.6% above.

Commenting on the latest ONS figures, head of investment analysis at AJ Bell, Laith Khalaf, said that while the UK economy has now recovered to its pre-pandemic level, momentum seems to be “ebbing away” while “recessionary forces are gathering”.

“GDP came in at 0.8% for the first quarter of the year, a little below forecasts,” Khalaf highlighted. “What is more concerning is that almost all of the growth was registered in January, and March actually saw a 0.1% fall in GDP.

“Household expenditure was still positive in the first quarter, as consumers took advantage of new found freedoms to go out and spend money in shops, restaurants and hotels. But that was really the calm before the storm, as higher energy prices and taxes kicked in from April.

“Government policy is also having an effect on the headline GDP numbers, as the fading of the winter booster programme and the wind down of the test and trace service reduced overall economic activity.” 

Portfolio manager at Quilter Investors, Hinesh Patel, added: “The Bank of England has a near impossible task of managing the economy out of this quagmire. They are in aggressive rate raising mode for now, but this cannot remain the case for long given the economic issues already starting to play out.

“With talk of recessions and weak global growth, they cannot afford to choke the economy to the point where they exacerbate the problem. Nimble monetary policy will be required, something that hasn’t necessarily been on show in the last six months.

“For investors, the volatility is only going to be prolonged. Staying invested and being adaptive with your asset choices is going to be key.”

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