The United Kingdom’s economy saw an unexpected contraction of 0.1% in January on a month-on-month basis, according to recent data from the Office for National Statistics (ONS). This downturn was primarily attributed to a slump in the production sector.
Analysts surveyed by Reuters had forecast a 0.1% gross domestic product growth for the month, highlighting the surprising nature of the negative performance.
Previously, ONS data in February showed the UK economy experienced a slight growth of 0.1% in the fourth quarter, surpassing expectations, following a stagnant third quarter.
The nation’s monthly GDP figures have shown notable fluctuations, with a 0.1% drop in October, a 0.1% rise in November, and a more robust 0.4% increase in December driven by improvements in services and production.
The slower-than-expected economic growth in the UK could prompt the Bank of England to carefully assess the situation on its monetary policy. The Bank of England cut interest rates for the first time this year in February, while indicating that more reductions could be coming.
The central bank also slashed its 2025 growth forecast from 1.5% to 0.75%, balancing the imperative to stimulate economic growth against the inflationary challenges posed by U.S. President Donald Trump’s trade tariffs, although the UK has not yet been directly impacted by these measures.
This GDP data release comes just ahead of the UK Treasury’s “Spring Statement” scheduled for March 26, where Chancellor Rachel Reeves will present an economic strategy update.
There is growing concern that the fiscal policies announced last fall, which aim to elevate the tax burden on businesses, might hamper investment, job creation, and broader economic growth. Reeves, however, has defended these tax increments as necessary, emphasizing that they are singular actions aimed at enhancing public services investment.
