By GB News (Politics) | Created at 2025-03-14 08:07:29 | Updated at 2025-03-14 13:08:32
5 hours ago
The UK economy contracted by 0.1 per cent for January 2025 a blow to Chancellor Rachel Reeves, according to the latest figures from the Office for National Statistics (ONS).
Reeves has pledged to "kickstart the economy" with the fiscal policies outlined in her Autumn Budget and upcoming Spring Statement but she has received backlash from the business community over her tax changes.
This shrinking of the economy comes as a surprise to City economists, who expected gross domestic product (GDP) growth to jump by 0.1 per cent over the period.
ONS data revealed the services sector was unable to offset a decline in the industrial sector and maintain growth from the previous month.
As a result of these figures, the UK inches closer to recession territory, which happens when a country experiences two consecutive quarters of negative economic growth.
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The UK economy contracted by 0.1 perc cent in January in a blow to Rachel Reeves
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Over the three months to January, GDP was estimated to have grown by 0.2 per cent, partially contributed by growth in the services sector, according to the ONS.
Liz McKeown, the director of economic statistics at the statistics authority, broke down how the figures continued to show "weak growth".
She explained: "The fall in January was driven by a notable slowdown in manufacturing, with oil and gas extraction and construction also 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."
The Chancellor is under fire for her fiscal policies
PA
Reacting to the news, the value of the pound slipped with sterling being 0.1 per cent lower against the dollar at $1.293 and was down 0.1 per cent versus the euro, which is worth 83.9p.
Jochen Stanzl, the chief market analyst at CMC Markets, slammed the figures as "a complete disappointment across the board" and noted the Bank of England will face extra pressure to slash interest rates.
Last month, Reeves outlined her vision for boosting the economy, which included her support for the expansion of an extra runway at Heathrow airport.
However, business leaders have reacted negatively over her decision to raise rate paid towards National Insurance employer contributions and the hike in the minimum wage.
The Bank of England will be under further pressure to slash interest rates
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"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."
Hailey Low, an associate economist at the National Institute of Economic and Social Research (NIESR), said: "The UK economy started 2025 on a negative note.
"Following the lacklustre performance in the second half of 2024, growth remains fragile due to global and domestic uncertainty.
"It is crucial that the upcoming Spring Statement provides stability rather than adding to domestic uncertainty.
"Frequent policy U-turns risk undermining business and investor confidence at a time when clarity and consistency are most needed."
