The UK's 0.1% decline in GDP for January raises concerns about the economy's direction, contradicting growth goals. Economic forecasts from the Office for Budget Responsibility are expected to be weaker than previously anticipated. Factors contributing to the downturn include a 1.1% drop in manufacturing and a 0.2% decline in construction, alongside only a modest 0.1% growth in services. Businesses face uncertainties with potential tariff impacts and rising costs from national insurance and living wage increases. Overall, the economic backdrop appears weak as companies adapt to ongoing global disruptions.
The UK's economic performance may have been similarly downbeat in February, with any boost from consumer spending amid strong wage growth and lower interest rates weakened by the brake on business activity from this torrent of global uncertainty.
The ONS blamed weak manufacturing output, down by 1.1% on the month, and construction, which fell by 0.2%, for the poor GDP readout.
January's decline in GDP followed 0.4% growth in December, and the ONS says that over the three months to January GDP expanded by 0.2% compared with the three months to October.
Businesses are also bracing themselves for the increase in employer national insurance contributions coming into force in April, alongside a significant rise in the national living wage.
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