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11 Apr 2022

Economic recovery stutters as rising costs affect businesses, says East Midlands Chamber

Commenting on the latest GDP figures for February 2022, published by the Office for National Statistics (ONS) today, East Midlands Chamber chief executive Scott Knowles said: “While economic output continued to rebound, the significant slowdown in growth – from 0.8% in January to 0.1% in February – indicates the UK economy was losing the pace it had gathered when emerging from the effects of the pandemic, even before the impact of the war in Ukraine was considered.

“Activity fell in industries such as manufacturing and construction, which are crucial to the East Midlands economy, although some of this was offset by growth in tourism-related and accommodation sectors as all Covid-19 restrictions ended.

“The concern is that February’s slowdown will likely be the start of a prolonged period of considerably weaker growth as rising inflation, surging energy bills and a crisis in the cost of doing business damage key drivers of UK output, including consumer spending and business investment.

“In the Chamber’s latest Quarterly Economic Survey for Q1 2022, cashflow fell for a net 3% of East Midlands businesses – the first time it has moved into negative territory in more than a year – leading to a 2% decline in investment intentions for plant and machinery compared to the previous quarter.

“With the beginning of the new financial year in April bringing additional expenses for companies in a higher energy price cap, a national insurance hike and VAT rise for hospitality and tourism organisations, the cost of doing business crisis is intensifying.

“The Government must provide urgent financial support through the expansion of the energy bills rebate scheme to include small firms and energy-intensive businesses, as well as introducing an SME energy price cap to protect smaller firms from some of the price increases.”