U.K. economy shrinks by 0.1% in January

LONDON: The United Kingdom’s economy unexpectedly contracted by 0.1% month-on-month in January, according to official figures released on Friday. The Office for National Statistics (ONS) attributed the decline primarily to a contraction in the production sector.

Economists polled by Reuters had anticipated a 0.1% growth in the country’s GDP for January. The U.K. economy had previously grown by 0.1% in the fourth quarter, surpassing expectations, while it remained flat in the third quarter.

The monthly GDP data has shown mixed results since then, with a 0.1% contraction in October, a 0.1% expansion in November, and a 0.4% month-on-month expansion in December, driven by growth in services and production.

Friday’s GDP release is the final data print before the U.K. Treasury’s “Spring Statement” on March 26, when Chancellor Rachel Reeves will present an update on her plans for the British economy. The statement will be accompanied by economic forecasts from the Office for Budget Responsibility, the U.K.’s independent economic and fiscal forecaster, which will assess the likely impact of the government’s tax and spending plans.

Concerns have been raised that the Treasury’s fiscal plans, announced last fall, which include increasing the tax burden on British businesses, could negatively affect investment, jobs, and growth. Reeves has defended the tax increases, describing them as a one-off measure necessary to boost investment in public services.

In February, the Bank of England made its first interest rate cut of the year, signaling further cuts to come as it halved the U.K.’s growth forecast for 2025 from 1.5% to 0.75%. The central bank stated it would carefully balance the need to stimulate growth with the inflationary risks posed by U.S. President Donald Trump’s trade tariffs, although the U.K. has not been targeted so far.