The UK economy unexpectedly recorded zero growth in January, according to official figures from the Office for National Statistics (ONS). The 0% gross domestic product (GDP) reading fell short of City forecasts of 0.2% growth and marked a slowdown from December's 0.1% increase.
The stagnation comes amid rising global energy prices triggered by the US-Israel conflict with Iran, which has pushed oil above $100 a barrel. Analysts warn that sustained high energy costs could drive UK inflation higher, potentially forcing the Bank of England to raise interest rates rather than cut them as previously hoped.
The service sector flatlined in January, with falls in recruitment activity and hospitality weighing on output. Employment services saw the largest negative contribution from a single industry, while food and beverage services dropped 2.7% as fewer people dined out. The production sector contracted 0.1%, though construction grew 0.2%.
Paul Dales, chief UK economist at Capital Economics, said: 'With GDP not rising at all in January, it is clear the economy was subdued even before the leap in energy prices triggered by the Middle East conflict.' Andrew Goodwin of Oxford Economics warned that if oil hit $140 a barrel, UK inflation could rise from 3% to 5% by year-end, potentially causing a mild recession.
Chancellor Rachel Reeves responded: 'Our economic plan is the right one, but I know there is more to do.' She is expected to outline Labour's economic strategy in a speech next week amid growing calls for an emergency energy support package. The UK economy grew 1.3% in 2025, slightly below official forecasts of 1.5%.
