UK economy unexpectedly contracted 0.1% in January

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The UK economy unexpectedly contracted by 0.1 per cent in January, delivering a blow to chancellor Rachel Reeves ahead of her high-stakes Spring Statement this month. 

Friday’s monthly GDP figure from the Office for National Statistics was below both the 0.1 per cent growth predicted by economists polled by Reuters and December’s 0.4 per cent.

The chancellor is preparing to rein in public spending in her March 26 Spring Statement after disappointing growth and government borrowing figures sparked fears that she is on track to break her fiscal rules.

The fallout from US President Donald Trump’s escalating trade war has added to the headwinds facing the UK.

The pound weakened slightly after the data release, down 0.2 per cent against the dollar at $1.292.

The Bank of England is expected to keep rates on hold at 4.5 per cent at its meeting next week amid flickers of resurgent inflation. Last month, the BoE cut its economic growth forecast for the first quarter of 2025 to 0.1 per cent from the 0.4 per cent expected in November.

Labour won the general election last July with a promise to kickstart growth, but Reeves has faced criticism over her October Budget, which left businesses bearing the brunt of £40bn in tax increases.

This is a developing story