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Economy contracts by 0.1% in January

ended 14. March 2025

Monthly real gross domestic product (GDP) is estimated to have fallen by 0.1% in January 2025, mainly caused by a fall in the production sector, after growth of 0.4% in December 2024. Real GDP is estimated to have grown by 0.2% in the three months to January 2025, compared with the three months to October 2024, mainly because of growth in the services sector.

At the sector level, monthly services output grew by 0.1% in January 2025, following growth of 0.4% in December 2024, and grew by 0.4% in the three months to January 2025; production output fell by 0.9% in January 2025, following growth of 0.5% in December 2024, and fell by 0.9% in the three months to January 2025, with manufacturing output driving both the monthly and three-month falls; and construction output fell by 0.2% in January 2025, following a fall of 0.2% in December 2024, but grew by 0.4% in the three months to January 2025.

Newspage asked experts and business owners what this say about the economy, how optimistic they are about the year ahead and how this might impact sterling and the base rate. Their views are below.

8 responses from the Newspage community

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Gabriel McKeown
Political & Economics Writer at Sad Rabbit - Substack Newsletter
The idea that Britain’s economy is powering ahead is more wishful thinking than economic reality, as the country struggles to move beyond stagnation with weak growth and waning confidence. The data reveals a notable divergence across industries, with the production sector showing clear signs of strain, that could be the start of a protracted downturn, without policy intervention. Of course a minor slip in January is not the same as a precipitous fall, however the UK economy cannot afford complacency, and the real reckoning is expected in April, when Labour’s fiscal policy kicks in which could push the UK into an even deeper economic malaise. The government’s economic policies are a double-edged sword, promising growth while wielding a blade of austerity, with confidence in the economy plummeting as the true cost of the anti-growth policies are made clear. Without a serious reversal in fiscal objectives in the budget, this may just be the beginning of a serious downturn in the economy.
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David Belle
Founder and Trader at Fink Money
The Labour Party is turning us into a failed state. Recession is coming thick and fast and we should be in one by the end of the year. Well done Labour. December’s GDP was driven by services and production of manufacturing equipment, something which I think was in fact a way for firms to do some accounting trickery by buying plant before the tax rises come in, and or used to replace certain workers. Another interesting thing about living in a developing nation is whether you can actually trust the statistics. Judging from the recent and longstanding ONS debacle where they seem to have a real issue with data reliability, this is a valid concern.
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Harry Mills
Director at Oku Markets
This, without a doubt, is terrible news for the Chancellor ahead of her tax-grabbing raid on British business next month and the small matter of her Spring Statement on the 26th, when she will have to face the music. This will be an economic tune that she has herself conducted, in addition to updated OBR forecasts. Despite the UK economy just escaping a contraction in the fourth quarter of 2024, 2025 started with an unexpected 0.1% monthly decline in economic activity led by large falls in manufacturing and production. Between December and January, industrial production was down 0.9%, and manufacturing production was down 1.1%, whereas the services sector posted a tiny 0.1% expansion. The 3-month average for monthly GDP rose to 0.2% but was under the 0.3% forecast.
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Riz Malik
Independent Financial Adviser at R3 Wealth
More data to suggest the UK is in trouble with the production sector showing a big decline. There is no credible plan to save UK plc apart from hopes and prayers. With the budget changes shortly due to come in force and Trumps desire to crash the economy, the outlook is bleak.
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Michelle Lawson
Director at Lawson Financial
This makes sad reading but isn’t a shock. We have a government that talks about growth but does the opposite. The wider UK population know what they are doing is wrong so how can they let ravaging Reeves and two tier Keir continue? Their positions are becoming more untenable each day as they slowly destroy the country they allegedly champion.
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Emma Jones
Managing Director at Whenthebanksaysno.co.uk
This may be a curveball to economists but it will come as no surprise if you're a business on the ground. Conditions are tough, sentiment has been decimated since the Budget and companies are bracing for awful April. Add in global turbulence caused by the tariff war and things could get a lot worse before they get better. The Government needs to look long and hard in the mirror.
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Jamie Elvin
Director at Strive Mortgages
The 0.1% GDP contraction highlights the UK’s fragile recovery, with manufacturing and construction struggling. While it’s unlikely to trigger an immediate rate cut, it strengthens the case for one later this year. If markets anticipate earlier cuts, swap rates could dip, leading to lower mortgage rates. Sterling may also come under pressure if economic weakness persists. The Bank of England will tread carefully, balancing inflation concerns with the need to support growth.
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Keith Budden
Managing Director at Ensurety
The Government may be wishing for growth, but the economy seems to be continuing in its state of permanent malaise. However, that having been said, the overall statistics only tell part of the story. I can only speak from the perspective of our business (and I appreciate we are in the service sector (although our clients come from both service and manufacturing sectors)) is that the current feeling seems to be much more positive than it was in the last quarter of 2024, certainly we are now closing significantly more orders. We wait to see though what the impact of Trump's tariffs, the ongoing moving situation in Ukraine, and Starmer taking large impact moves with the removal of NHS England will be on overall economic outlook.