The UK economy recorded zero growth in January in a blow for Sir Keir Starmer’s government, new figures show.
Data released by the Office for National Statistics (ONS) on Friday reveals that gross domestic product (GDP) did not rise or fall in January.
Figures released last month also show that the UK economy grew by just 0.1 per cent in the final three months of 2025 as chancellor Rachel Reeves continues to struggle to stimulate growth, a key manifesto pledge for Labour.
Most economists had expected growth of 0.2 per cent in January.
Housebuilding in particular saw a tough start to the year, with private housing new work plunging by 5.6 per cent in January – the worst performance since March 2020 at the start of the Covid pandemic.
The newest data does not include the impact of the US-Israeli war on Iran, which has sent oil prices soaring and created fears of a new cost of living crisis in the UK if bills rise.
Earlier this week, the Office for Budget Responsibility (OBR) warned that UK inflation could hit 3 per cent by the end of the year if oil and gas prices remain at current levels.
Ms Reeves said: “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.”
The ONS director of economic statistics, Liz McKeown, said of the data: “The overall picture remains subdued, with no growth in the latest month.”
Appearing before Parliament’s Treasury Committee on Wednesday, Ms Reeves said it would be “unwise to speculate” about the Iran war’s impact on UK inflation, growth, or interest rates. She confirmed, however, that the Treasury is “looking at a number of scenarios”.
The conflict has restricted shipping through the Strait of Hormuz, a vital route for oil and gas supplies.
In what was another major blow for the chancellor, Professor David Miles from the OBR warned the Commons Treasury select committee that there was “nothing but negative” economic consequences from the Iran war.
He said said oil prices were currently about 20 per cent higher than they were before fighting escalated, and gas prices were up by about 50 per cent, adding: “If there’s no change in the picture on prices from now on forward, we estimate something like a 1 per cent higher level of consumer prices in the UK by the end of the year.
“Right now, if prices don't change from where they are – both the spot prices and market expectations for futures prices, which is particularly important for the Ofgem price cap – we think we would end the year not near two per cent, but nearer 3 per cent.”
This goes against Ms Reeves’s hopes for the upcoming year, who had relied on inflation falling to the target of two per cent to justify her claims that her plan for the economy was working.
Barret Kupelian, chief economist at PwC, said: “The figures also cover only activity up to January, so they do not yet capture any spillovers from the latest Middle East tensions through energy prices, trade or financial markets.
“In calmer conditions, soft growth and a steady fiscal stance would strengthen the case for rate cuts.
“But central banks do not ease into a fog of geopolitical uncertainty. The case for lower rates is there domestically, but geopolitics may yet delay the verdict.”
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