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The UK economy unexpectedly shrank 0.1% in January, the Office for National Statistics reported Friday, highlighting the challenges facing the government as it prepares to announce widespread public spending cuts.
The contraction at the start of the year was largely driven by weakness in the country’s production sector and disappointed economists who had predicted 0.1% growth, The Financial Times reported.
The UK’s economic growth has been mostly stalled since May last year, and faces further headwinds from US President Donald Trump’s escalating trade war and the likelihood that the UK will be required to spend more on defense amid a US pullback.
“The world has changed, and across the globe we are feeling the consequences,” UK Chancellor Rachel Reeves said after the figures were published.
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The dip in growth will likely be problematic for Reeves, increasing the likelihood that official growth predictions could be downgraded and “further undermining the chancellor’s spending plans,” an analyst told the Financial Times.
Reeves is expected to deliver the Treasury’s Spring Statement later this month, which is widely reported to include widespread spending cuts.