A 0.1% Fall In GDP Piles Pressure On The Treasury

The UK economy shrank in March and it is easy to paint a picture of catastrophe.

- Anna Isaac

It's a problem because with forecasts suggesting this year will see the biggest fall in living standards since records began in 1956, this is really only just beginning to play itself out in the data.

With some quick to blame the cost of living crisis for rattling consumer confidence, it's worth adding a note of caution: this data was from March. The new price cap for energy bills, which rose more than 5 per cent or an average of about £700 per household per year, only came into force in April, when consumers' confidence in finances has plummeted considerably.

Put simply, while many of the poorest households are already suffering, we are only in the foothills of a mountain of troubles to come over choices such as heating, eating or not managing at all. The Treasury is not ignorant of this. Still, chancellor Rishi Sunak's resolve to try to paint himself as a fiscally prudent leader requires a watch-and-wait strategy.

A month's poor GDP performance will not see Sunak suddenly loosen the purse strings because he knows there is worse to come. There's wisdom, those around the chancellor believe, in waiting to calculate just how bad things are going to get.