AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
Highlights
UK gross domestic product declined in April, led by contraction in services and production
FTSE 100 and other European indices moved lower following the data
Chancellor prioritises growth through infrastructure and housing projects amid economic slowdown
The FTSE 100 and other European stock indices fell on Thursday following a drop in UK economic output for April. The contraction, reported by the Office for National Statistics, weighed on equities across sectors, with services and production both declining after a period of expansion earlier in the year.
UK GDP Falls with Services Sector Pullback
Gross domestic product for the UK showed a contraction in April. The services sector, which forms the largest component of the UK economy, recorded a decline during the period. This reversal came after positive growth in the previous month and emerged as the main driver behind the downturn.
The decrease in activity within business services and finance, as well as consumer-facing segments, contributed to the fall. Public administration, education, and health services also recorded softer performance, adding to the broad-based weakening across service-related industries.
Production and Manufacturing Add Pressure
The production sector also posted a fall during April. Manufacturing output declined, alongside weaknesses in energy supply and mining. The trend was consistent across both durable and non-durable goods industries.
These figures contrast with earlier momentum observed during the first quarter of the year, when production had supported overall growth. The dip in this sector aligned with softer external demand and rising cost pressures faced by domestic producers.
Construction Shows Growth Amid Broader Weakness
In contrast to services and production, the construction sector posted an increase. Housebuilding and infrastructure activity improved during the month, helping to partially offset broader economic weakness. However, the scale of construction growth was not sufficient to counterbalance declines elsewhere.
Demand for commercial projects remained stable, with continued emphasis on green building projects and regeneration programmes in urban areas. This trend aligns with government efforts to boost economic activity through capital spending.
Policy Context and Government Response
April's data emerged as the UK faced several headwinds, including policy changes that took effect during the same month. Higher national insurance contributions for employers began in April, which may have influenced business sentiment and short-term hiring activity.
In addition, international developments affected market confidence. The month started with new tariffs imposed by the US administration, impacting global trade flows and investor outlooks.
Chancellor Rachel Reeves reaffirmed the government's focus on economic renewal following the release. Emphasising transport, housing, and energy infrastructure, Reeves pointed to continued support for projects such as Sizewell C and in affordable homes.
Broader Market Movement Across Europe
Indices such as FTSE 350 and FTSE AIM UK 50 INDEX mirrored the losses seen in the FTSE 100, with declines across sectors. European peers including Germany’s DAX and France’s CAC also traded lower, reflecting caution over the UK's GDP data and its implications for the region’s economic health.
Investor reaction was influenced by a mix of domestic and international pressures, including monetary policy stances and evolving trade dynamics. Markets continued to monitor macroeconomic indicators and fiscal policy developments for signals on future performance.
