UK economy shrank unexpectedly by 0.1% in January

The UK economy shrank unexpectedly by 0.1% in January, with a slowdown in manufacturing one of the main reasons for the dip.

The performance was weaker than expected, and came after the economy had grown by 0.4% in December.

It will be seen as a blow to the government, which has said its number one priority is to boost UK economic growth.

The figures come ahead of the chancellor’s Spring Statement, which is expected to outline government spending cuts.

Liz McKeown, ONS director of economic statistics, said: “The economy shrank a little in January but grew in the latest three months as a whole, with the overall picture continuing to be of weak growth.”

Construction and oil and gas extraction had a “weak month”, she said.

But this was partially offset by retail, particularly food shops, “as people ate and drank at home more”, she said.

Chancellor Rachel Reeves said: “The world has changed and across the globe we are feeling the consequences.”

She added the government is “going further and faster” to “kickstart economic growth”.

Yael Selfin, chief economist at KPMG UK, said the UK economy had started the year “on the back foot” as uncertainty about Trump tariffs was making businesses cautious about investment.

She said predictions of “sluggish growth” means Reeves will probably “tighten purse strings” in the Spring Statement.

The recent cut to UK aid to fund an increase in defence spending “is a preview that some departments will see their spending plans squeezed”, she added.