The UK economy shrank by 0.3% in April, marking its sharpest monthly decline since October 2023, according to new data from the Office for National Statistics (ONS). The contraction follows modest growth in March and February and exceeded analysts’ forecasts of a 0.1% dip.

A slump in the services sector, particularly in property-related industries, contributed to the downturn. A recent change to stamp duty rules in England and Northern Ireland led to a significant drop in housing transactions, impacting estate agents and legal professionals. Meanwhile, the ONS highlighted a dramatic fall in goods exports to the US, which coincided with new tariffs introduced by Donald Trump at the start of April.

Manufacturing output also declined, down 0.6%, with the automotive sector reducing production amid concerns over US tariffs on car imports. In contrast, the construction industry provided a rare boost, growing by 0.9% thanks to a rise in new housing projects.

The figures arrive as employer national insurance hikes continue to weigh on business confidence. Payroll data from HMRC revealed a fall of 109,000 jobs in May—the largest drop since the early days of the pandemic. With over 250,000 jobs lost since the autumn budget, the economic setback presents a major challenge for the government’s recovery plans.