UK economy rebounds but Ukraine war clouds outlook

The UK economy bounced back quickly in January from the damage caused by the Omicron coronavirus outbreak, with a swift recovery in the services sector driving growth.

Gross domestic product increased 0.8 per cent on the previous month, faster than analysts had expected, after shrinking 0.2 per cent in December, official data showed on Friday.

The Office for National Statistics said that on this monthly measure, GDP was 0.8 per cent above its pre-pandemic level. The recovery, however, has been uneven, with production and consumer facing services still falling well short, while construction and all other services recovering more strongly.

The figures confirm that the spread of the Omicron variant dealt only a brief setback to the UK’s recovery, but economists warn that the outlook for growth is darkening, as the war in Ukraine fuels inflation, eating into household incomes, and threatens further disruption to supply chains.

Suren Thiru, head of economics at the British Chambers of Commerce, said the figures had been “pushed into the rear-view mirror by renewed domestic and global shocks”, while Yael Selfin, chief economist at KPMG, said growth momentum was “likely to be derailed” by the conflict.