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Highlights
UK GDP shrinks due to downturn in services and manufacturing
House and car production fall after early-year momentum
Growth in construction, retail, and research sectors offers partial support
The UK economy, tracked through the FTSE 100 and FTSE 350 indices, experienced a downturn in April, according to recent data from the Office for National Statistics. The contraction was steeper than economic forecasts, marking a pullback after earlier signs of recovery driven by the services sector.
The gross domestic product (GDP) figure, a primary indicator of the nation's economic performance, declined following a short-lived uptick in March. This movement has impacted broader market sentiment, with fluctuations observed across companies.
Services and Manufacturing Contribute to Decline
April saw both services and manufacturing sectors face setbacks. Legal and real estate firms recorded a slowdown, which followed a previous surge in housing transactions earlier in the year. That surge was driven by moving quickly to complete deals ahead of updated stamp duty regulations.
In manufacturing, car production lagged after positive activity in the first quarter. A decline in demand and a reduction in output contributed to the sector’s weakening performance during the month.
Resilience in Construction and Retail
Despite the overall economic pullback, some segments demonstrated strength. Construction activity expanded during the period, aided by infrastructure developments and housing projects. Retail also showed signs of improvement, buoyed by seasonal demand and restocking by major outlets.
Additionally, research and development initiatives saw progress, contributing positively to overall output and helping balance the losses in other segments.
Broader Three-Month Trend Remains Positive
While April reflected a contraction, the three-month view from February to April showed growth. The Office for National Statistics indicated that some business activities had likely been accelerated earlier in the year, which impacted April’s figures.
According to ONS insights, the early completion of deals and shifting timelines for production schedules led to this uneven distribution of economic output.
Government Response and Infrastructure Commitments
Following the release of the economic data, UK Chancellor Rachel Reeves reiterated the government’s commitment to stimulating growth through structural. Key initiatives under the Plan for Change include infrastructure improvements across city regions, expansion of affordable housing, and in energy projects such as the Sizewell C nuclear facility.
These plans aim to create jobs and sustain long-term economic momentum, with a focus on enhancing regional development and increasing economic participation across the country.
Economic observers will continue to monitor developments on the FTSE, with particular attention to sector-specific movements and performance indicators among leading components of the FTSE 100 and FTSE 350.
