The UK financial system shrank at the beginning of 2025, in response to official figures which had been anticipated to point out additional meagre development.
The Workplace for Nationwide Statistics (ONS) stated that output declined by 0.1% throughout the month following the 0.4% development seen in December.
A development determine of 0.1% had been tipped by a majority of economists however the ONS famous a stoop in manufacturing output.
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Its director of financial statistics, Liz McKeown, stated: “The financial system shrank a bit in January however grew within the newest three months as a complete, with the general image persevering with to be of weak development.
“The autumn in January was pushed by a notable slowdown in manufacturing, with oil and gasoline extraction and building additionally having weak months.
“However, services continued to grow in January led by a strong month for retail, especially food stores, as people ate and drank at home more.”
January’s knowledge marks a recent blow for the chancellor because the financial system faces headwinds on many fronts at a time when her acknowledged precedence is securing financial development.
Looming giant for Rachel Reeves is the specter of an opposed enterprise response to funds tax hikes she is because of impose from April.
Companies are going through the majority of the £40bn invoice by way of employer nationwide insurance coverage contributions and are warning of job losses, weaker pay rises and funding, together with potential value hikes, to account for the surge in prices.
Client spending energy can also be set to be examined similtaneously important payments together with these for council tax, water and family vitality are on account of rise sharply.
Different challenges embrace the escalating commerce warfare initiated by Donald Trump, which is tipped by economists to dent development prospects globally.
Ms Reeves is low on ammunition as she prepares a spring assertion for MPs later this month, with the welfare invoice set to be slashed to keep away from breaking her personal spending guidelines.
On the identical time, the unbiased Workplace for Finances Accountability is broadly anticipated to downgrade its forecasts for UK development forward.
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The chancellor stated of the ONS knowledge: “The world has modified and throughout the globe we’re feeling the implications.
“That’s why we’re going additional and sooner to guard our nation, reform our public companies and kickstart financial development to ship on our Plan for Change.
“And why we are launching the biggest sustained increase in defence spending since the Cold War, fundamentally reshaping the British state to deliver for working people and their families; and taking on the blockers to get Britain building again.”
Her Conservative counterpart, Mel Stride, urged her to make use of the spring assertion to vary course.
“It is no surprise that growth is down again, following near no growth in the last three months of 2024”, he stated.
“After persistently speaking Britain down, elevating taxes to report highs and crushing enterprise with their excessive employment laws this authorities is a development killer.
“Labour inherited the fastest growing economy in the G7 but since they arrived business confidence has collapsed and jobs are being lost.”
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