UK GDP: Lack of growth at the turn of the year

UK gross domestic product  (GDP) growth was 0.0% month-on-month in January compared to consensus expectations for 0.2%. These figures feel dated given events so far in March, but the start of the year disappointed for the UK economy.

Again, this remains an economy that isn’t growing much (GDP rose just 0.2% over the three months to January), but business surveys had been pointing to a pick-up in business activity post-JLR cyber-attack and Budget-uncertainty. The Office for national statistics (ONS) note that the largest single industry drag on GDP growth in January was employment services (consistent with persistently soft broader UK labour‑market data).

If February and March were to show zero growth, then Q1 would be on track to grow 0.1% the same pace as in Q4 2025. The Bank of England forecast for headline GDP growth in Q1 2026 was 0.3% compared with the previous quarter (as of the February 2025 Monetary Policy Report) and looks at risk of falling short unless activity picked up more significantly in February.

However, clearly things could be knocked further off track from March onwards by high oil and gas prices In their March 2024 report, the Office for Budget Responsibility (OBR) modelled a severe Middle East shock where oil and gas prices rise 75% above their central forecast with a broader disruption to global supply chains. In that scenario, the UK economy went into a recession lasting just over a year. However, that scenario assumed rate hikes (and a more severe shock than the one we are currently experiencing).

Looking at the detail of today’s figures [1]:

• Services output failed to grow in January (after growing a downwardly revised 0.2%M in December), falling short of consensus expectations (0.2%M). The largest drag on services output was administrative and support services (fell 2.3%M), driven by a 5.7%M fall in employment activities.
• Production output disappointed, falling 0.1%M (consensus: 0.2%M). The decline in output was partly attributable to mining and quarrying activity (down 3.2%M). That outweighed a marginal rise in manufacturing output (up 0.1%M) helped by the continued recovery of the autos sector after the JLR cyber-attack last year (where output is still 0.8% lower than it was in January last year).
• Construction output grew by 0.2%M in January, which came solely from a 3.3% increase in the repair and maintenance (up 3.3%M) sub-sector. Notably new work fell by 2.0% on the month. Weather may have played some role here though.

1. ONS; Morningstar UK (Alliance News); Bloomberg

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