Sterling Stabilizes Amid Fragile UK Economic Growth in Q1

The pound steadied on Friday after data showed the UK economy had avoided recession in the first quarter. This was a welcome relief for investors, who were rattled by news of its biggest one-day drop since mid-April the previous day. The Office for National Statistics (ONS) reported that GDP rose 0.3% between January and March, marking an end to six consecutive months of contraction – which is usually associated with economic recession.

The ONS said growth was driven mainly by services output, which increased 0.5%, while manufacturing grew 1%. Construction output also increased slightly but remained below pre-pandemic levels as it continues to be hampered by lockdown restrictions and limited demand from businesses and households alike due to ongoing uncertainty surrounding Brexit negotiations with Europe.

Despite this positive news however, economists have warned that there is still much work ahead if we are to make up lost ground during 2020’s pandemic induced slump in activity; particularly given current forecasts of weak consumer spending over coming months due to rising unemployment rates across Britain’s workforce coupled with continued government austerity measures, such as furlough schemes tapering off towards year end 2021/2022 fiscal years respectively.