Rachel Reeves revelled in a major spending splurge yesterday – but this morning she wakes up to a grim reality check.
The Chancellor delighted in getting out the cheque book as billions of pounds were allocated to health and defence combined with shiny new infrastructure projects.
But today is a different story.
The Chancellor says that the figures are “clearly disappointing” but it’s a stark reminder of the fragility of the UK economy and how difficult it will be to turbo-charge growth.
The effects of ‘Awful April’ – when a slew of added costs for business including that national insurance rise came in – has hit home.
This Labour government has put that push for growth as their number one mission which will have the knock-on effect of driving up living standards.
After a positive start to the year – where we saw growth up by 0.7 per cent – today we see it drop by 0.3 per cent for May.
We shouldn’t take one month’s figures in isolation but the fear is conditions for business and entrepreneurs have hit them hard.
The hike to national insurance contributions and minimum wage for firms kicked in at the start of April and this is how the economy has reacted.
As the British Chambers of Commerce outline the NI rise has hit investment, recruitment and prices.
The uncertainty of Donald Trump’s tariffs is also a drag on the UK with the largest monthly fall on record in goods exports to the US.
With dismal economic growth, the global trade war and stubborn inflation, the Chancellor will surely be left with little choice but to cut spending or raise taxes in the autumn.
Ms Reeves has iron-clad fiscal rules she insists are non-negotiable so it feels inevitable something will have to give. A cruel summer of speculation is on the cards.
