The UK economy unexpectedly flatlined in January, as the country failed to regain momentum.
Figures from the Office for National Statistics showed zero growth for the month of January, below analysts’ expectations of 0.2% growth.
The lack of expansion follows a slightly more positive end to 2025, when the economy grew by 0.2% in November and 0.1% in December.
The ONS said services showed no growth in January, while production fell by 0.1% and construction grew by 0.2% over the course of the month.
Industry commentators warned that the lacklustre figures could spell trouble for the UK’s outlook, particularly as they came ahead of the Middle East conflict and resulting market volatility.
Chris Beauchamp, chief analyst at IG, commented: “If this is the best the UK can manage before a new energy price shock hits, then we are all in trouble. Yet another miserable growth figure confirms the anaemic state of the economy, and one that is ill-placed to weather a fresh storm that will wallop consumer spending and government tax receipts, with the picture worsened by the UK’s higher energy costs.”
Kevin Brown, savings expert at Scottish Friendly, said: “Today’s GDP reading is disappointing and shows the UK economy is struggling to build momentum in the face of numerous headwinds.
“A major economic drag remains consumer confidence – or the lack thereof – with households grappling with elevated interest rates and nearly five years of higher inflation. This is a real concern for an economy that relies so heavily on consumption.
“Unfortunately, the outlook has also darkened due to the conflict in the Middle East, which has already sent shockwaves through financial markets. Swap rates, which determine the cost of fixed-rate mortgages, have surged since the outbreak, prompting lenders to pull products and reprice deals higher.”
Oil prices have been volatile since the start of the Iran war, pushing prices up at the petrol pump. If the conflict is prolonged, it risks pushing the country towards an energy shock – higher inflation and weaker growth. It also raises the possibility that the Bank of England would be forced to leave interest rates higher for longer, experts warned.
Brown continued: “Higher rates would be welcome news for those with cash savings, but any gains made on savings interest would likely be offset by higher inflation. It would also result in further pressure on households and businesses, which would weigh on growth.
“Much will depend on how the situation in the Middle East unfolds, but if tensions persist it could quickly turn into a particularly nasty and unwanted headwind for the UK economy.”
John Wyn Evans, head of market analysis at Rathbones, commented: “With the Monetary Policy Committee meeting next week, we hope to get more guidance as to how they are viewing the current situation. On the one hand, higher energy prices will feed through to inflation and the Bank will want to ensure that long-term inflation expectations remain well anchored.
“On the other hand, activity will be curtailed as spending is diverted towards energy from other areas of the economy. However, unlike the US Federal Reserve which has a dual mandate that covers both inflation and employment, the Bank of England’s overriding policy driver is its inflation target. That suggests at best a ‘wait and see’ attitude.
“And we could be waiting and seeing for a while. Almost everything depends on how the war in the Middle East plays out, especially the duration of shipping disruption through the Strait of Hormuz.”
