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The UK economy experienced a 0.1% contraction in January, presenting a setback for Rachel Reeves ahead of the upcoming spring statement.

Contrary to the expectations of City economists, who had anticipated a 0.1% growth, the data from the Office for National Statistics showed that the services sector failed to compensate for the decline in the industrial sector, thus negating the growth from the previous month.

Manufacturing output saw a decline of 1.1% in January 2025, reversing the 0.7% growth seen in December of the previous year. Construction also acted as a drag on the economy due to challenges posed by poor winter weather affecting housebuilders.

Commenting on this, Yael Selfin, the chief economist at KPMG UK, stated, “The UK economy begins the year on uncertain ground, with global uncertainties impacting the outlook.”

In contrast, the economy had expanded by 0.4% in December, contributing to the last quarter of the year recording a 0.1% increase and avoiding two consecutive quarters of zero growth.

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p class=”dcr-s3ycb2″>The Bank of England’s monetary policy committee is expected to remain unaffected by these latest figures when it convenes next week. Financial markets anticipate interest rates will remain steady at 4.5%.

Source: https://www.theguardian.com/business/2025/mar/14/uk-economy-shrinks-blow-to-rachel-reeves