Britain's economy unexpectedly shrank in January, official data showed Friday, piling more pressure on the Labour government ahead of its Spring Statement on the economy.
Gross domestic product contracted 0.1 per cent in the month after GDP rose 0.4 per cent in December, the Office for National Statistics (ONS) said in a statement.
Chancellor Rachel Reeves is expected to make billions of pounds of spending cuts, including to welfare, in the government's Spring Statement on March 26, a follow-up to her inaugural budget last October, as public finances struggle under high inflation and borrowing.
"The world has changed and across the globe we are feeling the consequences," Reeves said in a statement responding to the data.
The data provides a fresh blow to the government and prime minister Keir Starmer, who has put growing the UK economy at the top of his mission since Labour won a general election in July.
"The fall in January was driven by a notable slowdown in manufacturing, with oil and gas extraction and construction also having weak months," noted Liz McKeown, director of economics at the ONS.
"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," she added.
Nicholas Hyett, investment manager, Wealth Club noted that the dramatic slowdown in sectors like accommodation and food services which expect to be hit hard by higher living wage and employer national insurance contributions in April, is “really worrying.”
“Tariffs and increased labour costs were more worries than reality in January, the month covered by these numbers. Those worries will soon be transforming into realities,” Hyett said.
“That leaves plenty of room for economic growth to deteriorate further, with far fewer catalysts to spark an economic recovery. We could be at the start of a long slow slide into recession.”
