UK Economy Stalls in January, Testing Reeves’ Growth Ambitions Amid Sector Slumps

The UK economy faced a setback in January 2025, contracting by 0.1% month-on-month, down from a 0.4% expansion in December 2024, and missing market expectations of a 0.1% growth, as reported by Reuters. This unexpected decline, the steepest since April 2024, poses a challenge to Finance Minister Rachel Reeves’ efforts to boost growth ahead of her parliamentary economic update.

According to MIDF views, annual growth slowed to 1% year-on-year in January (from 1.5% in December), below the consensus forecast of 1.2%. The production sector was the primary drag, plummeting by 0.9% month-on-month, with manufacturing dropping 1.1% due to sharp declines in basic metals (-3.3%) and pharmaceuticals (-3.1%).

UK Economy Stalls

Mining and quarrying fell 3.3%, led by a 3.7% drop in petroleum and gas extraction, while construction shrank by 0.2% amid stormy weather. The services sector, however, eked out a modest 0.1% growth, supported by administrative services (+1.9%) and retail trade (+0.7%). Over the three months to January, GDP rose by 0.2% quarter-on-quarter.

MIDF anticipates a cooling growth trajectory, noting, “We foresee moderating growth momentum amid uncertainties surrounding the UK economy,” citing tighter trade rules, subdued confidence, and concerns over Labour’s economic policies as key risks.

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