UK economy shrinks in January in fresh setback for Starmer

Gross domestic product fell 0.1% in January, hit by declines in manufacturing and construction, the Office for National Statistics said Friday.

The UK economy unexpectedly shrank at the start of 2025, piling fresh pressure on the Labour government over the lack of momentum since it returned to power last summer.

Gross domestic product fell 0.1% in January, hit by declines in manufacturing and construction, the Office for National Statistics said Friday. Economists had expected a 0.1% increase. It means output is still barely larger than when Labour won a landslide election victory in July.

The figures will ratchet up the pressure on Chancellor Rachel Reeves to start to delivering on her promise to boost growth as she prepares to announce what’s expected to be a sobering economic update on March 26.

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While economists are predicting a return to steady growth this year, risks to the outlook are mounting with Donald Trump’s escalating trade war sending stocks crashing and triggering fears of a global downturn. The hope is that Britain’s plans for big spending on infrastructure will underpin growth.

© 2025 Bloomberg

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