The British economy recorded a modest growth in the first months of 2023, surpassing the initially expected moderate recession. But the sudden and unexpected drop in production in March is a testament to how fragile the country’s economic recovery remains.

According to official data released yesterday, UK GDP grew by 0.1% in the first quarter. GDP growth rates were similar to those seen in the last quarter of 2022 and were in line with the forecasts of economists recently polled by Reuters. Production grew by 0.2% year-on-year, but in March alone, GDP contracted by 0.3%, although it was expected to remain at the same level as last year. While industrial production and the construction sector rose, the key services sector fell 0.4% due to weak sales in the automotive sector, as well as in the retail sector in general. Such indicators are explained by both unusually rainy weather and high inflation.

“As the mainstay of the UK economy, the services sector, continues to contract due to high borrowing costs and rising prices, growth continues to be slow,” said Tom Stevenson, fund manager at Fidelity International. Inflation in the UK fell to 10% in March, which is in double digits compared to the US and higher than in the eurozone. It is noted that on Thursday the Bank of England raised its key interest rate to 4.5%, reaching the highest level since 2008. Rising inflation largely reflects the impact of rising gas import costs as well as food last year following Russia’s invasion of Ukraine. This is a development that, according to the Bank of England, has made the country poorer. For its part, the bank estimates the growth of the British economy at 0.25% in 2023, revising the original forecast for a 0.5% GDP contraction.

UK GDP grew in the first quarter of 2023 at the same pace as in the eurozone, but since the start of the coronavirus pandemic, it has not performed well. This is mainly due to trade barriers set up in the post-Brexit era, as well as restrictions on hiring low-wage workers from other countries.