Fears of a recession have grown after the UK economy shrunk for the second consecutive month amid spiralling living costs.

Gross domestic product (GDP) unexpectedly fell by 0.3 per cent in April, according to the Office for National Statistics, after shrinking by 0.1 per cent in March. 

Most analysts predicted the economy would grow by 0.1 per cent. GDP is still just 0.9 per cent above pre-pandemic levels.

All major sectors – services, manufacturing and production – contributed negatively to fall in GDP. Production fell by 0.6 per cent in April due to supply chain disruption and inflationary shocks.

The main driver of the fall was the winding down of the government’s Test and Trace system, according to the ONS. 

The grim outlook comes a week after the Organisation for Economic Co-operation and Development (OECD) warned that Britain’s GDP was set to flatline in 2023, and called on Chancellor Rishi Sunak to increase spending and cut taxes to alleviate the cost-of-living crisis.

Russia’s invasion of Ukraine and the hangover from the pandemic have contributed directly to rises in fuel and food costs, while a UK-EU trade war risks pushing prices up further and damaging investment. 

Inflation is due to hit 10 per cent by the end of the year. Ministers are privately pointing the finger at Bank of England governor Andrew Bailey for raising interest rates too slowly.