The UK economy has had a “disappointing” start to 2025 with GDP falling by 0.1 per cent in January 2025.
Latest figures from the Office for National Statistics revealed the economy had shrunk, mainly caused by a fall in the production sector, following growth of 0.4 per cent in December 2024.
Although GDP fell by 0.1 per cent, it grew by 0.2 per cent in the three months to January 2025, according to the data.
Rob Morgan, chief investment analyst at Charles Stanley, said this news would be a “disappointment” to Rachel Reeves as she gears herself up for the Spring Statement and reaffirms the “lacklustre” state of the economy.
“Overall, there could be a small improvement in the short term. Consumers and businesses will continue to benefit from falling interest rates with three cuts made since last summer and another perhaps around the corner. A boost to government spending should also provide a temporary uplift.
“It is likely to prove a struggle though. Many government initiatives including housebuilding and infrastructure investment could be hamstrung by a lack of construction and other skilled workers.
“Meanwhile, consumer confidence and spending could be jeopardised by a deteriorating employment picture, plus some businesses are expected to retrench following Budget measures that involve higher employment costs,” he added.
Nicholas Hyett, investment manager at Wealth Club, felt this could be “a long slow slide into recession”.
“Tariffs and increased labour costs were more worries than reality in January, the month covered by these numbers.
“Those worries will soon be transforming into realities. That leaves plenty of room for economic growth to deteriorate further, with far fewer catalysts to spark an economic recovery,” he explained.
George Lagarias, chief economist at Forvis Mazars, was slightly more optimistic and felt conditions may improve.
He said: “Trade wars will probably eventually level off. Europe, meanwhile, Britain’s biggest trade partner, is eying improved growth conditions as Germany sheds its fiscal restraints. Deregulation could help businesses and increase credit.”
