UK financial system unexpectedly shrank by 0.1% in January in blow to Rachel Reeves

The UK economy contracted by 0.1 per cent in January in a blow to Rachel Reeves and Sir Keir Starmer’s growth mission, according to the Office for National Statistics (ONS).

Just weeks before the chancellor delivers her spring statement setting out the government’s spending plans, the ONS said the economy started the year shrinking.

The fall in gross domestic product (GDP) was a shock, with most economists expecting it to have risen by 0.1 per cent in the first month of the year.

But, for the three months to January, GDP was estimated to have grown by 0.2 per cent, driven by growth in the services sector, the ONS said.

ONS director of economic statistics Liz McKeown the figures continued to show “weak growth”.

She said: “The fall in January was driven by a notable slowdown in manufacturing, with oil and gas extraction and construction also having weak months.

“However, services continued to grow in January led by a strong month for retail, especially food stores, as people ate and drank at home more.”

Ms Reeves said Britain was “feeling the consequences” as “the world has changed”.

But she added: “That’s why we are going further and faster to protect our country, reform our public services and kickstart economic growth to deliver on our Plan for Change.

“And why we are launching the biggest sustained increase in defence spending since the Cold War, fundamentally reshaping the British state to deliver for working people and their families; and taking on the blockers to get Britain building again.”

This is a breaking story… more to follow.