The British economy shrank unexpectedly in early 2025, and the Keir Starmer government lacked new pressure on momentum since Labor’s return to power last summer.
The National Bureau of Statistics said on Friday that its GDP fell 0.1% in the January storm, as manufacturing and construction declines, the National Bureau of Statistics said on Friday. Economists are expected to increase by 0.1%. This means the output is still greater than when Labour won a landslide election victory in July.
The Chancellor of the Finance Minister Rachel Reeves pointed to the global turbulence background of weakness, warning: “The world has changed, and on a global scale, we are feeling the consequences.”
Reeves bears a commitment to strive for growth after a dismal economic indicator under labor. She is preparing to announce that it is expected to make an official growth forecast on March 26, which will be a striking economic update.
Friday’s figures mean that the economy has contracted in four of the seven months since Labour took office. GDP was only 0.3% higher than in June.
The pound extended losses, falling to $1.2924 as traders gradually increased expectations for more interest rate cuts. Traders are now seeing a 57 basis points decline this year.
January’s weakness was partly hit by Britain’s biggest storm in 10 years, suggesting that certain sectors could rebound in February.
While economists predict a steady growth recovery this year, the risks of the outlook are growing, with Donald Trump’s escalating trade war shattering stocks and raising concerns about a global recession. Hopefully, the UK’s large spending plans on infrastructure will support growth.
“After the lack of performance in the second half of 2024, growth remains fragile due to global and domestic uncertainty,” said Hailey Low, an economist at the National Institute of Economics and Social Studies. “It is crucial that the upcoming spring statements provide stability rather than increase domestic uncertainty.”
Bloomberg’s economics theory…
“After a sharp slowdown in the second half of 2024, the surprise drop in GDP in January still gave the UK economy a modest rebound in the first quarter. Our view is that growth will strengthen over the course of 2025. However, if the data continues to disappoint, then it will be difficult for the Bank of England to stick to its gradual approach to policy mitigation. We still believe that the risk is that central banks are cutting faster than we expected.”
– Read the terminal reactions of Ana Andrade and Dan Hanson
Labor has unveiled a range of policies to help it achieve its commitment to boost growth, including lifting construction projects and controversial developments that light up green. However, the growth in the second half of last year was sporadic, and after the October budget weight budget, people’s sentiment indicators were certain.
ONS said production in 8 of the 13 manufacturing industries in January fell, with metals and medicines experiencing the biggest decline. It said anecdotal evidence suggests that the month’s construction was hit by storms, rain and snow. Oil and gas production has also declined.
The fallen part was served up 0.1%, the largest part of the UK economy. According to ONS, retailers’ January record was strong in January, thanks to people eating more frequently at home.
BOE expects the economy to continue to expand at a bland pace, forecasting growth of 0.7% in 2025 after a 0.9% rise last year. Faced with uncertain prospects, BOE rates are expected to remain rates next Thursday, warning the market will only cut gradually.
“We suspect bad news about GDP is enough to convince the Bank of England to lower interest rates at next week’s meeting,” said RSM UK economist Thomas Pugh. “Stable monthly volatility and the economy are bouncing, which should alleviate fears that Britain is in a recession.”
Officials are balancing support for a stagnant economy with stubborn signs of inflationary pressure and signs of increased uncertainty. They marked the threat of tariffs and the impact of increased wage tax on the employment market and prices of labor.
This story was originally fortune.com
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