The UK economy contracted by 0.1% in January, falling short of economists’ predictions of 0.1% growth. This unexpected decline, driven by a slowdown in manufacturing, construction, and oil & gas extraction, raises concerns ahead of Chancellor Rachel Reeves’ Spring Statement later this month.
Despite a 0.2% growth over the last three months, the overall economic picture remains weak. Businesses warn that higher National Insurance contributions, rising minimum wages, and reduced business rates relief could hinder job creation and wage growth. Additionally, uncertainty over U.S. tariffs under President Trump and increased defense spending pressures public finances.
The Labour government faces criticism from opposition parties, with the Conservatives labeling it a “growth killer” and the Liberal Democrats arguing that its economic strategy leaves the country “on life support.” Meanwhile, the Bank of England and Office for Budget Responsibility are expected to downgrade growth forecasts, fueling expectations of welfare cuts to meet fiscal targets.
As the Spring Statement approaches, economic challenges—including trade uncertainties, sluggish growth, and tax increases—pose a significant test for the UK government’s ability to revive economic momentum.