Britain’s economy unexpectedly flatlined in January, raising concerns about the strength of the recovery even before the impact of the conflict in the Middle East and rising oil prices.
Official figures from the Office for National Statistics revealed that GDP growth was zero, contrasting with economists’ expectations of a 0.2% increase.
This weaker-than-expected data has increased fears that rising fuel and energy costs, driven by the conflict involving the US, Israel, and Iran, could derail the fragile UK economy. Economists have warned that a prolonged conflict and sustained spike in oil prices—already above $100 a barrel for the first time in nearly four years—could even push Britain into economic contraction by 2026.
These latest figures follow sluggish growth of only 0.1% in the final three months of last year, amid uncertainty surrounding the autumn budget and weak activity in December.
Rachel Reeves commented that the data reflects the pressures of an “uncertain world,” with the conflict in the Middle East threatening to drive inflation even higher.
Earlier this week, the Office for Budget Responsibility warned that sustained energy price rises could push UK inflation up by an additional 1 percentage point, potentially reaching around 3% by the end of the year. The fiscal watchdog had already cut its 2025 growth forecast to 1.1%, down from 1.4%, even before the escalation in the Middle East.
Thomas Pugh, chief economist at RSM UK said: “If energy prices stay around current levels, another bout of stagflation looks likely, with growth slipping to around 0.5% this year.
“If energy prices move even higher, in a similar way to 2022 a recession looks more likely, given the weaker labour market and tighter starting point for monetary and fiscal policy.”
Barret Kupelian, chief economist at PwC, said: “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.”
The Chancellor 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.”
Mel Stride, Shadow Chancellor posted on X: “This morning, the ONS confirmed the economy is flatlining – with no growth in the latest month.
“This follows the @OBR_UK halving the growth forecast for 2026. At the Spring Statement, Labour claimed they had the ‘right economic plan’, doubling down on their failed policies. Labour’s economic mismanagement has left us vulnerable to the potential impacts of events in the Middle East.
“They must now Axe the Fuel Tax, back North Sea Oil and Gas and come forward with a proper plan to cut the deficit and get the benefits bill down.
“Only the Conservatives have a leader with a backbone, a clear plan and the experienced team to deliver a stronger economy and get Britain working again.”
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