The UK Economy Contracted Unexpectedly in January.

The UK economy contracted by 0.1% in January, with a decline in manufacturing contributing significantly to the downturn.

This weaker-than-expected performance followed 0.4% growth in December and is a setback for the government, which has prioritized economic expansion.

The figures were released ahead of the chancellor’s Spring Statement, where spending cuts are anticipated.

Liz McKeown, ONS director of economic statistics, noted that while the economy shrank slightly in January, growth over the past three months remained weak but positive.

Construction and oil and gas extraction saw declines, though retail—particularly food sales—provided some support as more people dined at home.

Despite January’s drop, the ONS estimated 0.2% growth over the three months leading up to January, highlighting the volatility of monthly economic data.

Chancellor Rachel Reeves stated, “The world has changed, and we are all feeling the consequences globally.”

She emphasized that the government is taking bold steps to “kickstart economic growth.”

Yael Selfin, chief economist at KPMG UK, noted that the economy began the year “on the back foot,” with uncertainty over Trump tariffs making businesses hesitant to invest.

Given forecasts of “sluggish growth,” Selfin predicted Reeves would likely “tighten purse strings” in the Spring Statement. She pointed to the recent reduction in UK aid to fund increased defense spending as an indication that some departments would face budget constraints.

Anna Leach, chief economist at the Institute of Directors, downplayed the significance of a single month’s economic fluctuations but stressed that the economy remains “weak and vulnerable.”

Car manufacturers, in particular, are struggling due to trade uncertainties linked to Trump tariffs and shifting electric vehicle policies.

Leach warned that the latest growth figures “certainly won’t help” ahead of the Spring Statement, where the Office for Budget Responsibility is expected to revise its growth forecast downward.

Last month, the Bank of England cut its UK growth projection for the year by half.