The UK economy shrank unexpectedly by 0.1% in January after seeing growth of 0.4% in December last year.
Commenting on the latest GDP data Julian Jessop, economics fellow at the Institute of Economic Affairs, said:
"The latest official data are perhaps not as bad as they look, but they do confirm that the UK economy made a poor start to 2025. The 0.1% contraction in UK GDP in January was partly a correction after the unexpectedly large increase of 0.4% in December. The underlying trend rate of growth is probably still around 0.2% per quarter.
"Nonetheless, this feeble rate would remain well short of the numbers baked into the OBR’s forecasts for last October’s Budget. And this is even before the main measures actually kick in next month. The best hope is that the current weakness is just a temporary phase as businesses adjust to higher costs. The economic outlook is also unusually uncertain, both at home and abroad, which is holding back some hiring, investment, and spending.
"Activity could then pick up again once April is out of the way and if the UK continues to avoid the worst of the global trade wars. But there is also a growing risk that the announcement of a further round of tax rises and spending cuts in the fiscal event on 26 March will prolong the doom loop. The labour market is now also starting to crack under the weight of higher costs and increased regulation.
"In short, the economy is on a knife edge, and the Chancellor could be about to tip the UK into a full-blown recession."
