The United Kingdom economy stagnated in January, falling short of expectations, just weeks before the US-Israeli war with Iran began.
December had seen modest growth of 0.1%, but January registered zero growth, highlighting a “subdued” economic picture, according to the Office for National Statistics. Analysts described it as a “disappointing start to the year.”
The figures predate the escalation of the Middle East conflict, which has triggered a sharp rise in energy prices and could send ripple effects through economies worldwide.
Prime Minister Sir Keir Starmer warned this week that the longer the conflict endures, the greater the potential impact on the UK economy.
Labour has prioritized economic growth since taking office. Chancellor Rachel Reeves stated, “Our economic plan is the right one, but I know there is more to do. In an uncertain world, we are building a stronger and more secure economy by cutting the cost of living, cutting national debt and creating the conditions for growth to make all parts of the country better off.”
GDP, or gross domestic product, measures the total economic activity of individuals, businesses, and governments within a country.
In January, the ONS reported that the services sector remained flat, production fell by 0.1%, and construction expanded by 0.2%.
Yael Selfin, chief economist at KPMG UK, warned that growth “is likely to remain elusive.” She explained, “The UK economy started the year on the back foot and activity is expected to weaken further amid sharply rising energy prices.”
Selfin added that borrowing costs have increased in recent weeks, and analysts anticipate that the Bank of England may maintain higher interest rates for longer.
“That will be a headwind for businesses who have already seen an immediate increase in energy and other input costs. The weaker growth outlook coupled with growing cost pressures will likely see firms scale back their investment plans over the coming year.”
