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UK Economy Contracts by 0.1% in January as Manufacturing and Construction Decline

The unexpected GDP drop raises concerns over domestic tax policies and global trade tensions ahead of the Spring Statement.

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The fall in GDP in January was driven by a notable slowdown in manufacturing, with oil and gas extraction and construction also having weak months

Overview

  • The UK's GDP shrank by 0.1% in January, driven by a 0.9% decline in production, including a 1.1% drop in manufacturing output and a 0.2% fall in construction.
  • The services sector showed marginal growth of 0.1%, supported by retail gains, but consumer-facing industries like hospitality struggled.
  • Chancellor Rachel Reeves faces criticism for a £26bn employer tax hike, which has dampened private sector confidence and hiring activity.
  • Global economic uncertainty, exacerbated by Donald Trump’s escalating trade war and market corrections, is adding pressure on the UK economy.
  • Economists warn of potential stagnation, with businesses and consumers cautious amidst rising costs and looming tax increases in April.