The UK economy recorded an unexpected decline at the beginning of the year, driven primarily by a sharp drop in industrial production, according to official data released on Friday.
Figures from the Office for National Statistics (ONS) showed that gross domestic product (GDP) contracted by 0.1% in January, following a 0.4% increase in December. Economists had projected a modest 0.1% rise, making the contraction an unwelcome surprise.
The downturn was largely attributed to a 0.9% fall in industrial production, which reversed a 0.5% gain seen in the previous month. This marked the steepest decline in the sector since April 2024. Manufacturing output also declined significantly, dropping 1.1% after a 0.7% increase in December. Meanwhile, construction output dipped slightly by 0.2%.
Providing only limited support to the overall economy, the services sector posted a marginal increase of 0.1%, notably weaker than the 0.4% rise recorded in December.
Over the three months to January, GDP grew by 0.2% compared to the previous three-month period ending in October. However, year-on-year growth slowed to 1.0% in January, falling short of the anticipated 1.2% expansion.
Economist Paul Dales of Capital Economics noted that the monthly contraction underscores the fragility of the UK economy, even before the full impact of higher business taxes and global economic uncertainties takes hold.
The weaker-than-expected figures come just ahead of the Chancellor’s Spring Statement, scheduled for March 26. The Office for Budget Responsibility is also set to unveil updated government spending plans during the announcement.
The recent economic data is likely to influence fiscal and monetary discussions, as policymakers assess how best to navigate ongoing challenges while supporting growth and stability in a shifting global landscape.
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