British economy contracts in April amid domestic, global pressures

The British economy experienced a contraction in April, according to the latest data.

Data released by Standard & Poor's (S&P) on Wednesday show that in April, the British services Purchasing Managers' Index (PMI), manufacturing PMI and composite PMI all fell into the contraction range.

Among them, the services PMI fell from 52.5 in March to 48.9 in April, the lowest point in nearly 27 months; the manufacturing PMI fell from 45.3 to 44, the lowest in nearly 32 months; and the composite PMI fell from 51.5 to 48.2, the lowest in nearly 29 months.

Although the drop exceeded market expectations, the fact that the British economy contracted in April did not surprise the market.

In order to adjust to domestic and foreign adverse factors, business expansion and personal consumption in Britain have both shrunk in recent months.

At the business level, to cope with the increase in employer National Insurance contributions starting in April, companies have had to implement layoffs and efficiency enhancement measures.

A survey by the British Chambers of Commerce (BCC) shows that in the first quarter of this year, only 20 percent of companies were increasing staff, compared to 24 percent in the fourth quarter of last year.

To save costs, 20 percent of companies have cut spending on employee training. At the same time, the rate of British business closures rose significantly in the first quarter of 2025.

According to an analysis of government data by real estate data company Altus Group, at the end of 2024, the number of pubs in Britain dropped below 39,000 for the first time. In 2024, 412 pubs were demolished or repurposed, with over 34 pubs closing each month on average. Data from the company Campaign for Real Ale shows that in the first three months of this year, 303 British pubs closed.

An analysis of published liquidation notices by British media outlet City AM shows that in the first two months of 2025, over 1,100 companies faced liquidation, a year-on-year increase of nearly one-quarter, making it the fastest pace of business failure since 2010.

From the perspective of individual consumption, to cope with uncertainty in economic growth, consumers' saving tendency has increased, while their consumption tendency has weakened.

Data released by the British Office for National Statistics on March 28 show that in the fourth quarter of last year, the household saving rate rose to 12 percent, up from 10.3 percent in the third quarter.

The latest survey released by the British Retail Consortium (BRC) on Thursday shows that in April, British residents' saving tendency increased compared to March.

Helen Dickinson, chief executive of the BRC, pointed out that "UK consumer expectations for the economy have fallen to a historic low, and both business and consumer confidence are very fragile."

The contraction in business investment and consumer spending has led to the British economy shrinking in April. Behind this phenomenon lie two main factors: domestic policies in Britain and overseas trade tensions.

Domestically, the new fiscal budget starting in April raised employer National Insurance rates, significantly increasing employment costs for businesses.

Data from S&P show that in April, the average cost burden on British businesses rose sharply and at an accelerating pace. The overall input cost inflation rate reached its highest level since February 2023.

British business owners pointed out that this was mainly due to the increase in National Insurance contributions and the rise in the minimum wage.

Chris Williamson, chief business economist at S&P, noted that "higher labor costs are putting pressure on businesses, which is related to changes in National Insurance and minimum wage standards that took effect at the beginning of the month."

From an international perspective, the biggest adverse factor comes from U.S. tariffs. The United States is Britain's largest single export market. U.S. tariff increases directly affect the country's exports to the United States and indirectly affect Britain's exports to other countries.

In its latest World Economic Outlook report, the International Monetary Fund (IMF) downgraded Britain's 2025 economic growth forecast from the previous 1.6 percent to 1.1 percent.

The reason given by the IMF for the downgrade is the impact of U.S. tariffs and the increased uncertainty in the global economy.