Published by Global Banking & Finance Review®
Posted on March 14, 2025
3 min readLast updated: January 24, 2026
Add as preferred source on GoogleThe UK economy contracted by 0.1% in January, posing challenges for finance minister Rachel Reeves. Industrial output declined, impacting growth efforts.
By Andy Bruce and David Milliken
LONDON (Reuters) - Britain's economy contracted unexpectedly in January, extending a run of stop-start data that has beset finance minister Rachel Reeves' attempts to spark growth, before an update to parliament on the economic outlook.
Gross domestic product fell by 0.1% in January, pulled down by a sharp drop in industrial output compared with December, the Office for National Statistics said on Friday.
A Reuters poll of economists had forecast a monthly expansion of 0.1%. While January's drop only partially reverses a 0.4% expansion in December, the reading represents a disappointment for Reeves, whose number one mission is to get the economy growing.
"The world has changed and across the globe we are feeling the consequences," Reeves said in response to Friday's data.
She is due to present new economic and fiscal forecasts from the Office for Budget Responsibility in her March 26 Spring Statement, with weak growth and higher borrowing costs eating into the slim margin against which she met her fiscal rules in October's budget.
Reeves has said the fiscal rules are non-negotiable and has indicated she will cut public spending if needed to ensure they are not broken.
Sterling weakened by around two tenths of a cent against the U.S. dollar after the data and the futures market priced in a marginally faster pace of Bank of England interest rate cuts this year.
Over the three months to January, the economy expanded by 0.2%, the ONS said, slightly weaker than the 0.3% Reuters poll consensus.
"Following the lacklustre performance in the second half of 2024, growth remains fragile due to global and domestic uncertainty," said Hailey Low, economist at the National Institute of Economic and Social Research think tank.
"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."
Manufacturing output slumped by 1.1% in January alone, with the metals and pharmaceutical sectors performing especially poorly, while the broader industrial sector was also hurt by a fall in oil and gas extraction.
Output in the dominant services sector grew by 0.1%, marking the third straight month-on-month expansion. Supermarket sales rose but spending at pubs and restaurants fell as Britons sought to save money by eating at home.
Construction output slipped by 0.2%, with the ONS citing anecdotal evidence from companies of stormy weather hitting construction activity.
(Reporting by Andy Bruce and David Milliken; Editing by Kate Holton and Timothy Heritage)
Gross domestic product fell by 0.1% in January, according to the Office for National Statistics.
Reeves stated, 'The world has changed and across the globe we are feeling the consequences,' highlighting the challenges ahead.
Manufacturing output slumped by 1.1%, particularly in the metals and pharmaceutical sectors, while the broader industrial sector was also affected.
Reeves is expected to present new economic and fiscal forecasts on March 26, amid concerns of weak growth and higher borrowing costs.
Sterling weakened by around two tenths of a cent against the U.S. dollar following the disappointing economic data.
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