“The UK economy started the year on the back foot and activity is expected to weaken further amid sharply rising energy prices. Although households will be partially shielded from the worst of the impact until July, with the Q2 Ofgem energy price cap set to fall next month, sentiment is likely to weaken. Consumers could cut back on discretionary spending to offset the squeeze from higher prices.
“Borrowing costs have risen in recent weeks with investors now expecting the Bank of England to keep interest rates higher for longer in response to the energy shock. That will be a headwind for businesses who have already seen an immediate increase in energy and other input costs. The weaker growth outlook coupled with growing cost pressures will likely see firms scale back their investment plans over the coming year.
"UK GDP was flat in January, with both construction and production output contracting. We expect sluggish momentum to have carried over into February, with activity likely to slow further from March onwards.”
