14 March 2025, 07:39 | Updated: 14 March 2025, 08:08
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The UK economy unexpectedly contracted by 0.1% in January marking the latest blow to Chancellor Rachel Reeves.
Growth of 0.1% had been expected by the majority of economists.
Following the news early on Friday, Ms Reeves said Britain is “feeling the consequences” of an ever-changing geopolitical landscape.
“The world has changed and across the globe we are feeling the consequences,” Ms Reeves said.
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“That’s why we are going further and faster to protect our country, reform our public services and kickstart economic growth to deliver on our plan for change.
“And why we are launching the biggest sustained increase in defence spending since the Cold War, fundamentally reshaping the British state to deliver for working people and their families; and taking on the blockers to get Britain building again.”
This announcement marks another blow to Rachel Reeves, who has faced calls for her to resign in the wake of disappointing economic growth since Labour took power.
In response to the figures, the Tories branded the news a “growth killer” after latest figures showed the economy had contracted by 0.1% in January.
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Shadow chancellor Mel Stride said: “It is no surprise that growth is down again, following near no growth in the last three months of 2024.
“After consistently talking Britain down, raising taxes to record highs and crushing business with their extreme employment legislation, this Government is a growth killer.
“Labour inherited the fastest growing economy in the G7 but since they arrived business confidence has collapsed and jobs are being lost.
“The Chancellor has 12 days until her emergency budget – she must think again or hard-working people will continue to pay the price of a Labour Government without any business experience.”
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ONS chief Liz McKeown, 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.
“The fall in January was driven by a notable slowdown in manufacturing, with oil and gas extraction and construction also having weak months.
“However, services continued to grow in January led by a strong month for retail, especially food stores, as people ate and drank at home more.”
The Confederation of British Industry (CBI) said a contraction in the UK economy in January showed the UK’s recovery is “fragile”.
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Ben Jones, lead economist at the CBI, said: “After a surprisingly strong performance in December, some payback was always a possibility in January.
“But the mixed picture across different sectors in recent months suggests the recovery is still fragile.
“There are signs that the drop in business and consumer economic confidence following the autumn budget is bottoming out.
“But downside growth risks remain from the potential for a softer labour market and an uptick in inflation.
“And rising global trade tensions could also keep business investment on the sidelines.”