Closing post
Time to wrap up….
The UK economy unexpectedly flatlined in January, stoking concerns over growth amid the global energy price shock triggered by the US-Israel war on Iran.
Figures from the Office for National Statistics (ONS) showed 0% growth in gross domestic product (GDP), down from an increase of 0.1% in December, as the economy failed to recover from uncertainty surrounding the chancellor Rachel Reeves’s autumn budget.
Falling significantly short of City predictions for growth of 0.2%, the figures came as the UK and other countries faced a potentially severe economic hit as the Middle East conflict drove up oil and gas prices, hitting consumers with higher living costs.
The pound fell against the US dollar after the figures were released, to a three-month low.
In a fresh blow to the government’s growth ambitions after a challenging start to the year, output in the service sector flatlined amid falls in recruitment activity and the hospitality sector.
One eoconomist warned that the oil crisis could drive the UK economy into a recession this year, although others were less pessimistic.
There was gloomy GDP news from the US too, where the economy only grew half as fast as initially estimated in the last quarter of 2025.
US GDP rose at an annual rate of 0.7% in October-December 2025, new data from the US Bureau of Economic Analysis shows. That’s the equivalent of less than 0.2% growth in the quarter.
The trade body for the UK’s petrol station industry has got into a row with the government after claiming the “inflammatory language” used by ministers to describe rising pump prices may have incited abuse against forecourt staff.
The Petrol Retailers Association (PRA) said ministers had for several days suggested that forecourts might be “price gouging” and “ripping off” motorists as global oil markets have surged in response to the war in Iran.
Owners of SUVs could face charges to drive in London, after the mayor and transport authorities said they were reviewing the increased danger posed by larger, heavier cars…..
…. And London mayor Sadiq Khan has said he would be encouraging the Met to abandon his armoured car in favour of a smaller vehicle.
Ed Miliband has unveiled plans that could make it easier to build nuclear power plants closer to homes and on sensitive nature sites, as he attempts to speed up the development of energy infrastructure.
Updated
Benchmark UK government bond prices are weakening this afternoon, pushing up the yield (or interest rate) on the debt.
The 10-year gilt yield is up 5 basis points (0.05 percentage points) today, on track for its highest daily close since January 2025, Reuters points out.
Updated
FTSE 100 posts second weekly drop in a row
After another volatile week, the UK’s stock market has closed with a fall today.
The FTSE 100 index has closed down 44 points, or 0.43%, at 10,261 points tonight.
That means it has lost around 0.23% this week, after losses every day except Tuesday (when it jumped by 1.6%).
That’s the second weekly fall in a row, after a 5.7% tumble in the first week of the Iran war.
RAC: average petrol price at 18-month high
The average UK petrol price has hit an 18-month high, data from motoring group the RAC shows.
According to the RAC, the average price of a litre of petrol has risen to 140.60p, up from 132.8p the day the Iranian war began.
Diesel is now being sold at an average of 159.18p, up from 142.38p two weeks ago.
RAC head of policy Simon Williams says:
“Households, especially those that depend on the car, are under increasing financial pressure as a result of the conflict in the Gulf. The average price of a litre of unleaded has now risen by 6%, or nearly 8p, to 140.6p since the start of the conflict and is it at its highest in 18 months. Diesel has rocketed by 12% - or almost 17p - to 159.2p a litre, a price we’ve not seen since November 2023. Filling a family car is now £4 and £9 more than it was less than two weeks ago.
Williams adds:
“The fact the cost of a barrel of oil has exceeded $100 and wholesale fuel prices continue to rise is concerning, but it’s the speed at which drivers are feeling the effects which is under the spotlight now.
Drivers deserve - and should expect - to be treated fairly when it comes to filling up, especially with pump prices still heading north. We therefore hope the meeting between the fuel industry and government on this important issue is productive.
Reminder: that meeting should be taking place today:
Pound hits three-month low
The pound is continuing to have a bad day, after this morning’s GDP data showed the UK’s economy didn’t grow in January.
Sterling is now down a whole cent, and traded as low as $1.3228, its lowest since 3 December.
This is mainly driven by the strength of the dollar, with the pound pretty flat against the euro today.
Updated
US-Iran war could drive up sulphuric acid prices
The Iran conflict could disrupt supplies of sulphuric acid, which plays an important role in the base metals market.
Natixis CIB Research have warned this week that the war could tighten the market further as Middle Eastern producers account for around a quarter of global sulphur supply.
This sulphur is produced through oil and gas refining, and then turned into sulphuric acid, which is itself used to extract metals such as copper and nickel from their ores.
Natixis analyst Bernard Dahdah explains:
Sulphuric acid is particularly important for the base metals market. It is a key reagent in hydrometallurgy and leaching, particularly for extracting metals such as copper, nickel, uranium and REE.
Sulphuric acid is mainly produced from elemental sulphur (the feedstock) which mostly comes from oil and gas refining along with gas processing. Over the past two and half years prices have risen by around 500% mainly due to a surge in nickel HPAL.
In September of last year, Ukraine successfully targeted Russia’s Astrakhan processing gas plant.
As Russia stopped the export of sulphur, prices almost doubled by the end of 2025. The war between the US/Israel and Iran has exacerbated the tightness in supply as the Middle East accounts for almost a quarter (around 84 Mt) of the world’s sulphur production.
Quite a row has blown up between Britain’s petrol retailers and the government today.
Earlier today the Petrol Retailers Association (PRA) said it has withdrawn from a meeting with chancellor Rachel Reeves in Downing Street today over “concerns that inflammatory language by government ministers was leading to incidents of retail staff being abused by members of the public”.
But the PRA have now pulled a u-turn.
The PA news agency has reported that the PRA will attend the meeting with Reeves, and has deleted a series of posts on X in which it said it had pulled out over concerns that “inflammatory language” from ministers had led to retail staff being abused by the public.
Our Politics Live blog has all the details:
UK household energy bills are likely to jump this summer unless oil and gas bills ease back towards their pre-Iran war levels.
Consultancy Cornwall Insight now estimates that the UK energy price cap will rise to £1,827 per year for a typical duel fuel consumer is £1,827 in July, when it is next due to be set.
The cap is due to fall to £1,641 a year in April, a drop of 7%.
US consumer sentiment hit by Iran war
American consumer morale has dropped this month, as the Iranian war drives up fuel costs.
The University of Michigan’s monthly gauge of consumer sentiment has dropped to 55.5 points this month, down from 56.6 in February.
People grew gloomier after the conflict in the Middle East began.
Surveys of Consumers director Joanne Hsu explains:
Consumer sentiment dipped about 2%, reaching its lowest reading of the year. Interviews completed prior to the military action in Iran showed an improvement in sentiment from last month, but lower readings seen during the nine days thereafter completely erased those initial gains.
Gasoline prices have exerted the most immediate impact felt by consumers, though the magnitude of passthrough to other prices remains highly uncertain. A broad swath of consumers across incomes, age, and political affiliation all reported declines in expectations for their personal finances, down 7.5% nationally.
Interviews for this release were collected between February 17 and March 9, with about half completed after the start of the US military conflict in Iran.
Wall Street has opened higher
The Dow Jones industrial average has gained 395 points, or 0.85%, in early trading to reach 47,073 points, with most stocks rising.
The broader S&P 500 share index is up 0.8%, as has the tech-focused Nasdaq.
A report in the Financial Times today that European countries including France have opened talks with Tehran seeking to negotiate a deal to guarantee safe passage for their ships through the Strait of Hormuz may be calming jitters about the Middle East.
Motor City motorists feel pinch as gas prices surge
Motorists in Michigan are irked that the Iranian conflict has driven up their gasoline bills, my colleague Tom Perkins reports from Detroit:
On a rainy Detroit afternoon at a gas station off Interstate 75, Victor Rodriguez watched the pump tally tick up as he filled up his F-250 diesel pickup truck for $4.19 per gallon. It totaled $110. “Ridiculous,” he said.
The US-Israel war on Iran has crippled major portions of the oil supply chain, sending gas prices soaring as the conflict enters its third week. Rodriguez said he supports “getting rid of this thug”, referring to Iran’s Ayatollah Ali Khamenei, who was killed by the US, but the cost is too high.
Rodriguez said he jumped off the freeway while returning from an airport drop-off because he saw diesel advertised for $4.19 per gallon. The high price is a deal compared with the $5.00 per gallon he saw in Romeo, an exurb where he lives about a half-hour drive north.
“Nothing is worth higher gas prices, obviously,” Rodriguez said.
Seven in 10 Americans say Trump’s tariffs caused higher prices
Seven in 10 Americans say Donald Trump’s tariffs have led to them paying higher prices, according to an exclusive new poll for the Guardian.
The Harris Poll survey presents Republicans with a major problem in the battle for the upcoming midterm elections. The majority of all voters (72%) believe Trump’s tariffs have had a negative rather than a positive impact and 67% said tariffs aren’t the right solution for improving the economy.
Here’s the full story:
Here’s Richard Carter, head of fixed interest research at Quilter Cheviot, on today’s US GDP report:
“The latest US GDP estimate has halved the annualised rate of growth for the fourth quarter from 1.4% to 0.7%. Indeed, the rate for the whole of 2025 was revised downwards too, indicating that the US economy is slowing more than expected, and that perhaps both consumer and business confidence is weaker than hoped. This data gives a good indication of the health of the US economy in the lead up to the Iranian conflict.
“Given the strength of US energy security, it is insulated somewhat from the energy price shock being experienced in global economies right now, but regardless there will still be an impact. The US is doing all it can to mitigate against the rising oil price, knowing that it will push inflation up and prove to be a brake on the economy. The worry here is that stagflationary effects can become clearer, making the job of the Federal Reserve incredibly difficult. Such weak growth would usually result in rate cuts becoming apparent, but events in the Middle East mean we are more likely to be back in a holding pattern, waiting for clear signs that either the conflict will end or will drag on for years. For now that certainty is not available.
Updated
Donald Trump won’t be happy with today’s updated GDP report.
As well as halving growth in Q4 2025, the BEA has also lowered its estimate for growth during the year.
Real GDP is now estimated to have increased 2.1%, revised down 0.1 percentage point from the previous estimate. The increase in real GDP in 2025 primarily reflected increases in consumer spending and investment.
US economic growth revised down
Newsflash: The US economy only grew half as fast as initially estimated in the last quarter of 2025.
US GDP rose at an annual rate of 0.7% in October-December 2025, new data from the US Bureau of Economic Analysis shows. That’s the equivalent of less than 0.2% growth in the quarter.
The BEA had initially estimated annualised growth of 1.4% in Q4 2025, which was already a slodown after 4.4% growth in Q3.
Today, the Bureau says it has revised down its estimate of US exports, consumer spending, government spending, and investment in the quarter.
Although this data is somewhat historic, it shows the American economy had less momentum than we thought as it enters the energy shock caused by the Iran war.
The U.S. economy grew at a 0.7% annualized rate in Q4, down from the 1.4% rate estimated a month ago.https://t.co/1v8N8mGzhe pic.twitter.com/FO5PQhxyxY
— BEA News (@BEA_News) March 13, 2026
Updated
Hopes of UK mortgage rates steadily easing have “collapsed”, with at least 530 homeowner mortgage deals having vanished from the market since Monday, according to a financial information website.
Moneyfacts said the number of mortgages disappearing from the market since then represents about 7.5% of deals, PA Media reports.
Some average mortgage rates have already broken through the 5% mark amid changing financial markets, and Moneyfacts said earlier this week that mortgage deals have been withdrawn at the fastest pace since the 2022 mini-budget.
Adam French, Head of Consumer Finance at Moneyfacts, explains:
“At least 530 residential mortgage products have been withdrawn since Monday 9 March, representing around 7.5% of the market, although the pace of withdrawals has slowed as the week has progressed.
“Borrowers are now seeing the effect as these changes feed through to pricing, with the average two-year residential mortgage rate rising to 5.10%, up from 4.87% on Monday and now at its highest level since July 2025, while the average five-year rate has climbed to 5.19%, up from 4.98% and at its highest since April 2025.
“Even the very cheapest deals are shooting higher, with the lowest available mortgage rate climbing from 3.51% at the start of March to sit at 3.78% today, its highest level since April 2025.
“It’s unwelcome news for borrowers, as hopes of steadily falling mortgage rates have collapsed and given way to a much more uncertain outlook. The destination is now heavily dependent on how global markets and inflation expectations evolve in response to the conflict the Middle East.”
Updated
Oil prices are now dipping slightly, following reports that an Indian tanker has sailed out of the Strait of Hormuz.
Brent crude is now down 1% today at $99.50 a barrel, having earlier today traded as high as $102.75 a barrel.
An Indian government official said that an India-flagged oil tanker – the Jag Prakesh – had moved out from the east of the Strait of Hormuz carrying gasoline bound for Africa.
Neil Wilson, Saxo UK investor strategist, says:
Crude oil prices dipped by around -2% after India stated it has an oil tanker moving out of the Strait of Hormuz. Brent slipped below $99/barrel.
Too early to comment or speculate on what this means but markets are still very much trading the headlines and keen to latch on to any shred of good news. Expect this to be faded.
My LSEG screen shows the Jag Prakesh was moving south at 8.6 knots last night, the last time its position was recorded, having travelled on the east-hand side of the strait in recent days, rather than passing through it.
Updated
Oxford Economics: $140 oil could trigger mild UK recession
Oil would probably have to rise higher, and stay there, to push the UK into a recession.
Consultancy Oxford Economics have calculated that if oil rises to $140 a barrel, then UK inflation could top 5% in Q4 2026. This could cause the Bank of England to hike interest rates again, and the UK would likely suffer a mild recession.
“Given the significant uncertainty around how the conflict will evolve, we’ve published two alternative scenarios,” says their chief UK economist Andrew Goodwin, adding:
“The first assumes oil and European gas prices rise more than we anticipate in Q2, with oil averaging $100 per barrel. The second sees oil hitting $140 a barrel along with a bigger spike in gas prices.”
“In both scenarios, the main transmission channel to the economy is through higher inflation.
Daily data from RAC suggests petrol prices have already risen sharply over the past two weeks. Domestic energy bills would also rise substantially in July, when the next change in the energy price cap comes into force.”
European factories also entered the energy crisis in poor shape, new data shows.
Eurozone industrial production decreased by 1.5% in January from the previous month, the European Union statistics agency Eurostat reported this morning.
All major sectors of manufacturing contracted; eurostat reports that production:
decreased for intermediate goods by 1.9%,
increased for energy by 4.7%,
decreased for capital goods by 2.3%,
decreased for durable consumer goods by 1.9%,
decreased for non-durable consumer goods by 6.0%.
Euro area #IndustrialProduction down by 1.5% in January 2026 over December 2025, -1.2% over January 2025 https://t.co/IBs9Sv2IwD pic.twitter.com/7JD5YxiuwB
— EU_Eurostat (@EU_Eurostat) March 13, 2026
Swiss bank UBS believe the current energy crisis should be less damaging for Europe than the Russia-Ukraine experience in 2022.
Mark Haefele, chief investment officer at UBS Global Wealth Management, explains:
“While the situation is obviously concerning, we view the current risks from Iran as manageable for Europe’s economic growth outlook and equity markets, and we recommend staying invested through this period.
Still, we think one major sector change is warranted: we have reduced our rating on European banks to Neutral (from Attractive), while also closing our “Global banks” theme given less compelling valuations and rising macroeconomic uncertainty.”
UK longer term inflation expectations were sticky before Iran war
The UK public already believed inflation would be over target in five year’s time, even before the oil shock hit the economy.
The latest opinion polling on the public’s inflation attitudes, from the Bank of England and Ipsos, found that people expect inflation to be 3.7% in the longer term, matching the reading last November.
People had been more confident that inflation would fall in a year’s time. Median expectations of the rate of inflation over the coming year were 3.2%, down from 3.5% in November.
However, that was before the oil shock hit – this polling ended on 24 February, just before the Iranian war began.
There is no question that UK economic growth is soft, reports Andrew Wishart, senior uk economist at Berenberg:
The 0.2% 3m/3m gain in output this January was softer than the comparable rate in most years since the pandemic.
The quarterly gain was entirely driven by a tick up in output in November, which the economy has merely maintained since.
The data suggest that the early-year growth spurts of 2024 and 2025 will not be repeated. As a result annual GDP growth, which is immune from seasonality issues, remains weak.
Housebuilder Berkeley flags risk from Middle East crisis
British homebuilder Berkeley Group has warned that the Iran war could hurt the UK economy.
Berkeley reaffirmed its pre-tax profit guidance for the year this morning in a trading update, before flagging that it hasn’t yet seen the impact of the crisis on the housing market.
It told shareholders:
The trading environment over this period has remained constrained by the impact on consumer confidence of geo-political events and macro-economic uncertainty. However, sales enquiries remain good and the value of underlying reservations has been recovering towards the levels seen over the summer prior to the pre-Budget hiatus.
The emerging situation in the Middle East is weighing heavily on risk sentiment and we await to see the impact of this on the market. While reaffirming guidance, we are aware of the risk of a further deterioration in macro conditions with the potential for higher inflation in the near term and for interest rates to remain higher for longer.
Berkeley’s shares are down 3% this morning, putting it among the top fallers on the FTSE 100 index.
UK assets falling
The pound, and the UK stock market, are both falling this morning.
Sterling is down three-quarters of a cent against the US dollar at $1.3263, approaching the three-month low set last week.
The FTSE 100 index of blue-chip shares is down too – losing 58 points or 0.56% at 10,247 points.
The more domestically focused FTSE 250 index is down 0.7%.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, says:
“UK markets opened lower this morning, weighed down by a softer‑than‑expected GDP print and ongoing tensions in the Middle East. The economy failed to grow at all in January, suggesting activity was already subdued even before the recent jump in energy prices began to bite.
That’s starting to force a rethink of this year’s outlook, with previous 1.0% growth expectations now looking optimistic - with some scenarios pointing to closer to 0.6%, 0.4% or even 0.1%, depending on how long elevated energy costs stick around.
IoD: Stalling UK economy vulnerable to fallout from conflict in the Middle East
The outbreak of conflict in the Middle East hits an “already troublingly fragile UK economy” and sharpens the need for action to lift growth prospects, says Anna Leach, chief economist at the Institute of Directors.
Energy prices have already risen sharply, and unprecedented damage to supply capacity in the Middle East will have uncertain effects on energy prices longer term.
This risks driving up costs for businesses and consumers at a point when inflation was only just heading back to target, and could cause a further slump in confidence and impetus to spend. It is right that the government stands ready to intervene and support the economy once again.
But short-term agility must not distract from the UK’s longer term growth needs. From an energy strategy which takes a realistic approach to the transition to net zero, to workers’ rights that avoid overburdening employers, a laser focus on growth is urgently needed.”
Oil price shock likely to 'push the UK economy into recession'
The oil price shock hitting the global economy could push the UK into recession, Tomasz Wieladek, chief European macro economist at investment managent firm T. Rowe Price, is warning this morning.
Wieladek says the UK’s economy’s failure to grow in January show that it was weak even before the oil shock, which is likely to hit consumer spending and create more cost of living pressures.
Following today’s weaker-than-expected GDP report, Wieladek writes:
UK GDP growth stagnated in January, far weaker than market expectations of a 0.2% month-on-month pickup. The weakness was driven by services, the main part of the UK economy, and can be partially explained by tight monetary policy and the fiscal policy consolidation the UK is currently experiencing. Both of these policies are reducing demand, and the data is beginning to show it. Furthermore, AI is likely reducing hiring in the services sector, which in turn is leading to higher unemployment and softer demand. Overall, the UK economy has been weak ahead of the most recent oil shock.
The war in the Middle East and the consequent oil price rise will raise inflation and reduce consumer spending. The associated tightening in financial conditions we have seen in the bond market will exacerbate these effects. There will be significant demand destruction going forward.
The UK has been one of the weakest advanced economies in terms of recent growth performance. Therefore, the current oil price shock will most likely not just lead to inflation, but also push the UK economy into recession, raising unemployment and reducing GDP. Stagflation is just around the corner.
This puts the Bank of England (BoE) into a difficult position, he adds:
On the one hand, the BoE’s inflation-target credibility has weakened, as UK inflation has been higher and more persistent than elsewhere. On the other hand, a recession is likely. What should the BoE do? The key to easing financial conditions and supporting the recovery from the recession is to ease the current financial tightening. The best way to achieve this is to keep policy tight and publicly commit to reaching the 2% target at all costs.
A hawkish approach to monetary policy can kill two birds with one stone in this situation. Inflation credibility can be restored, and financial conditions will ease, as inflation risk premia get priced out. The BoE should keep rates on hold and prepare the public for the prospect of further hikes.
Markets expecting UK interest rates to rise next
Despite the lack of growth in January, and fears over the outlook for the year, hopes that the Bank of England might cut interest rates to support the economy have faded.
Since the Iran war began, the odds of a rate cut next week have collapsed from 80% to single figures. This morning, the money markets say there’s a 96.5% chance that the BoE holds rates at 3.75% next Thursday.
Looking ahead, there’s more chance of a rate rise than a cut by Christmas. The markets are predicting a 20 basis point (0.2 percentage point) rise in rates by December, which suggests there’s more than 80% chance of a quarter-point rise in rates by then.
A rate cut is fully priced in by June 2027.
Bank policymakers will need to judge the wisdom of sitting on their hands and allowing the energy shock the wash through the economy (higher rates won’t get more oil through the strait of Hormuz!), versus the risk of letting inflation expectations to jump.
The Iran war is a “growing downside risk” to the UK economy, warns Andrew Hunter, associate director and senior economist at Moody’s Analytics:
“The latest monthly GDP data suggest that the U.K. economy was continuing to struggle at the start of the year, with GDP experiencing no growth in January after only marginal gains in previous months.
The improvement in the PMI surveys suggests growth should pick up over the coming months and we expect growth over the first quarter as a whole to be slightly stronger, but there is a growing downside risk that the conflict in the Middle East will drive a sharper rise in inflation and deal a renewed blow to consumer and business confidence.”
Hoped for 'stability dividend' now unlikely
The lack of growth in January suggests that Rachel Reeves’s autumn budget has not given the economy a brisk pick-me-up.
There had also been hopes for a ‘stability dividend’ after the chancellor’s news-lite spring forecast thi smonth, this seems unlikely too – with the Iran war now threatening the economy.
Raj Badiani, economics director at S&P Global Market Intelligence, says:
“GDP growth strengthened moderately in the three months to January when compared to the previous three months, led by improving services output, released from the uncertainty that accompanied the 2025 Autumn Budget. However, the outlook has darkened with the hoped for “stability dividend” from a low-key Spring Statement unlikely to materialise. Furthermore, the economy is vulnerable to a growth downgrade for this year because of the war in the Middle East and the resulting spike in energy costs.
“We had previously assumed that economic conditions would improve in the second half of this year but the prospect of higher energy bills, a renewed rise in inflation and a pause in monetary policy easing are likely to hit business and consumer activity. A key risk is that households, fearful of a prolonged spike in energy costs, raise their precautionary saving.
RSM: UK economy enters the energy crisis with no momentum
Today’s GDP report shows the UK economy entered the energy crisis with no momentum, warns Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK.
Pugh explains:
“Zero growth in January highlights just how little momentum the economy had coming into the energy crisis. That makes it more likely that growth will dip sharply below 1% this year, even if there is a swift resolution to the crisis.
“Stagnation in January would make us worried about growth this year, even without the energy price shock that will start to show up in the March data. Indeed, the big improvement in survey data at the start of the year doesn’t seem to have carried over into stronger activity. Improved retail sales were offset by a sharp drop in hospitality activity, suggesting consumers are still cautious.
And the moribund employment and housing market clearly showed up in a 5.7% drop in employment activities, and a 3.9% drop in leasing activities. We had been expecting both these factors to improve over the rest of the year, but the sharp rise in borrowing costs and uncertainty makes that unlikely now.
NIESR: This is a worrying start
The UK’s failure to grow in January is a “worrying start” to 2026, reports Fergus Jimenez-England, associate economist at the National Institute of Economic and Social Research (NIESR).
Jimenez-England says:
“GDP did not grow in January, despite surveys pointing to a revival in business sentiment early in the New Year. Services stagnated while production entered its second month of contraction.
This is a worrying start to the quarter, given that the early-year improvement in business confidence is likely to be short-lived as global disruption linked to the Iran War hits the UK economy.
We expect the impact on growth in the first quarter to be limited, but if energy prices remain elevated for the rest of the year it could reduce GDP growth by around 0.2 percentage points in 2026.”
Reeves: We have the right economic plan
Chancellor of the Exchequer Rachel Reeves has responded to this morning’s GDP report, saying:
“Our economic plan is the right one, but I know there is more to do.
In an uncertain world, we are building a stronger and more secure economy by cutting the cost of living, cutting national debt and creating the conditions for growth to make all parts of the country better off.”
Employment activities fell in January
There was also a worrying decline in recruitment activity in January.
The ONS report there was a 5.7% fall in employment activities during the month – suggesting a decline in hiring by UK businesses at the start of this year.
The fall in employment activities was the largest negative contribution from a single industry to both services output and real GDP growth in January.
Many employment groups have blamed the government’s decision to increase employer national insurance contributions, and the minimum wage, for hitting recruitment.
It might even be a sign that artificial intelligence is now hitting the recruitment market, wiping out some job opportunities….
Updated
Estate agent activity slumped
A slump in the property sector hurt the economy over the three months to January.
The ONS reports that there was a 7.1% drop in “real estate activities on a fee or contract basis” over the quarter.
On an annual basis, UK GDP is estimated to be 0.8% higher in January 2026, compared with January 2025.
That’s quite a poor performance in historic terms.
UK grew 0.2% in last three months
Over the three months to January, the UK economy grew by 0.2%, up from growth of 0.1% in the three months to December.
That’s partly because activity picked up at JLR’s car factories, after a damaging cyber attack that halted production last September.
ONS director of economic statistics, Liz McKeown, says:
“Growth ticked up slightly in the latest three months, partly reflecting the recovery of car manufacturing, following the cyber incident in the Autumn. Within services, which also increased, wholesale continued to rebound from a weak summer. However, the overall picture remains subdued, with no growth in the latest month.
“There was another large fall in the construction industry in the latest three months, with continued contraction in housebuilding.”
UK economy failed to grow in January
Newflash: The UK economy stagnated in January, stumbling even before the Iranian war drove up energy prices.
The Office for National Statistics reports that UK GDP was unchanged in January, dashing hopes of 0.2% growth.
It says that in January:
Monthly GDP showed no growth, following growths of 0.1% in December and 0.2% in November 2025.
Services showed no growth, production fell by 0.1%, and construction grew by 0.2% in January 2026.
That suggests the economy was weaker than thought even before the threat of an energy price shock.
Brent crude oil is still trading over $100 a barrel this morning, having climbed since the Iran war started almost two weeks ago.
Updated
Introduction: UK GDP report for January
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
A lot has changed since January – with conflict in the Middle East driving oil prices to $100 a barrel, disrupting supply chains and fuelling stagflation fears.
So the latest gauge of the health of the British economy may be out of date even before it is delivered to us this morning.
The latest UK GDP report, due at 7am, is expected to show a pick-up in growth in the first month of 2026. Economists predict the economy will have grown by 0.2% in the month, up from 0.1% in December.
In more normal times, Rachel Reeves would be able to trumpet this as a sign that the recovery was gaining ground. But fears of an energy price shock means ministers should temper any enthusiasm.
Sanjay Raja, Deutsche Bank’s chief UK economist, explains:
After a disappointing end to the year, we expect the economy to jump to a flying start in Q1-26. Indeed, activity data has thus far been encouraging. And we expect some catch up in the first couple of months of the year, after a weak Q4-25.
The upcoming GDP report won’t be front and centre for markets, however. Events in the Middle East continue to overshadow lagged data.
The unfolding energy shock will have important implications for inflation and thus real disposable incomes. Some signs of stabilisation in the labour market now look fragile. The path for interest rate cuts is now also in doubt. In short, uncertainty has picked up yet again. Growth risks are now almost single-handedly skewed to the downside - with inflation risks skewed to the upside.
The agenda
7am GMT: UK GDP report for January
7am GMT: UK trade report for January
10am GMT: Eurozone industrial production report for January
12.30pm GMT: US PCE inflation measure
2pm GMT: US JOLTs Job Openings report
2pm GMT: University of Michigan’s survey of US consumer confidence
Updated
