The UK economy contracted by 0.1% in January, dealing a blow to Rachel Reeves before the spring statement later this month.
In a surprise to City economists, who expected 0.1% growth in January, the Office for National Statistics data showed the services sector failed to offset a decline in the industrial sector and maintain growth from the previous month.
Manufacturing output fell by 1.1% in January 2025, reversing a spurt of 0.7% in December last year. Construction was another drag on the economy after poor winter weather held back housebuilders.
Yael Selfin, the chief economist at KPMG UK, said: “The UK economy starts the year on the back foot as global uncertainty casts a shadow on the outlook.”
In December the economy expanded by 0.4%, helping the last quarter of the year to register a 0.1% rise and avoid two quarters of zero growth.
The Bank of England’s rate-setting monetary policy committee is forecast to be unmoved by the latest figures when it meets next week. Financial markets expect interest rates will be kept on hold at 4.5%.
after newsletter promotion
The National Institute of Economic and Social Research has forecast that the economy will grow by 0.4% in the first quarter of 2025, much higher than the Bank, which has estimated growth will be limited to only 0.1%.
Source: theguardian.com
