UK economy unexpectedly shrinks in January in blow to govt

Britain’s Prime Minister Keir Starmer in Aylesbury, England (Ben Stansall/Pool Photo via AP)

London, United Kingdom – Britain’s economy unexpectedly shrank in January, official data showed Friday, piling more pressure on the Labor government ahead of its Spring Statement on the economy.

Gross domestic product contracted 0.1 percent in the month after GDP rose 0.4 percent in December, the Office for National Statistics (ONS) said in a statement.

Britain’s finance minister Rachel Reeves is expected to make billions of pounds of spending cuts, including to welfare, in the government’s Spring Statement on March 26, a follow-up to her inaugural budget last October, as public finances struggle under high inflation and borrowing.

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“The world has changed and across the globe we are feeling the consequences,” Reeves said in a statement responding to the data.

The data provides a fresh blow to the government and Prime Minister Keir Starmer, who has put growing the UK economy at the top of his mission since Labor won a general election in July.

“The fall in January was driven by a notable slowdown in manufacturing, with oil and gas extraction and construction also having weak months,” noted Liz McKeown, director of economics at the ONS.

“However, services continued to grow in January led by a strong month for retail, especially food stores, as people ate and drank at home more,” she added.

It comes as Starmer has pledged to boost UK defense spending to 2.5 percent of the nation’s economy by 2027 amid uncertainty over the United States’ commitment to Ukraine and NATO.