UK financial system shrinks unexpectedly in blow to Rachel Reeves | Financial development (GDP)

The UK financial system contracted by 0.1% in January, dealing a blow to Rachel Reeves earlier than the spring assertion later this month.

In a shock to Metropolis economists, who anticipated 0.1% development in January, the Workplace for Nationwide Statistics information confirmed the companies sector did not offset a decline within the industrial sector and preserve development from the earlier month.

Manufacturing output fell by 1.1% in January 2025, reversing a spurt of 0.7% in December final yr. Building was one other drag on the financial system after poor winter climate held again housebuilders.

Yael Selfin, the chief economist at KPMG UK, mentioned: “The UK financial system begins the yr on the again foot as world uncertainty casts a shadow on the outlook.”

In December the financial system expanded by 0.4%, serving to the final quarter of the yr to register a 0.1% rise and keep away from two quarters of zero development.

The Financial institution of England’s rate-setting financial coverage committee is forecast to be unmoved by the newest figures when it meets subsequent week. Monetary markets count on rates of interest might be stored on maintain at 4.5%.

The Nationwide Institute of Financial and Social Analysis has forecast that the financial system will develop by 0.4% within the first quarter of 2025, a lot increased than the Financial institution, which has estimated development might be restricted to solely 0.1%.