UK Economy Contracts in April as Higher Energy Costs Weigh on Growth
The UK economy contracted by 0.1% in April 2026, marking its first monthly decline since August 2025, according to the latest GDP figures released on Friday.
The downturn follows a strong first quarter, during which the economy expanded by 0.6%, raising concerns that growth momentum may be fading as households and businesses face increasing financial pressures.
Services Sector Leads the Decline
The services sector, which represents the largest part of the UK economy, fell by 0.2% during April. Activity declined across eight of the fourteen service industries monitored by the Office for National Statistics (ONS).
Wholesale and retail trade dropped by 0.4% as consumers reduced spending on non-essential goods amid rising energy bills and higher living costs.
Meanwhile, output in the arts, entertainment and recreation sector plunged by 4.3%. The ONS attributed part of this decline to the cancellation of sporting events in the Middle East, which negatively affected UK-based businesses operating in the industry.
Healthcare activity also weakened during the month due to strike action by junior doctors, adding further pressure to overall services output.
Manufacturing and Industry Show Mixed Performance
Industrial production remained unchanged in April. Manufacturing activity received temporary support from precautionary stockpiling by businesses, while increased mining and quarrying output helped offset significant declines in both energy production and water supply.
Although these factors prevented a broader industrial slowdown, overall output showed little sign of sustained growth.
Construction Sector Records Modest Growth
The construction sector provided a small positive contribution to the economy, with output rising by 0.1% during April despite warmer weather conditions that can often affect building activity.
While the increase was modest, it helped limit the overall decline in GDP.
Growth Outlook Remains Weak
Economists at Capital Economics expect the UK economy to remain largely stagnant throughout the second and third quarters of 2026.
The research firm believes higher energy prices will continue to reduce household real incomes, limiting consumer spending and weighing on broader economic activity.
Capital Economics also said it does not expect the Bank of England to raise interest rates at its upcoming meeting next Thursday, despite the recent interest rate increase by the European Central Bank.
While additional rate hikes in July or September cannot be ruled out, the firm argues that weakening economic conditions are likely to keep borrowing costs unchanged for the remainder of the year.
