UK economy sputters in January, underlining growth challenges

Britain's economy unexpectedly contracted in January, extending a run of stop-start data that has dogged finance minister Rachel Reeves’ attempts to ignite growth, before an update to parliament on the economic outlook.

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Gross domestic product fell by 0.1% in January, pulled down by a sharp drop in industrial output compared with December, the Office for National Statistics said on Friday.

A Reuters poll of economists had forecast a monthly expansion of 0.1%. While January's drop only partially reverses a 0.4% expansion in December, the reading represents a disappointment for Reeves, whose number one mission is to get the economy growing.

“The world has changed and across the globe we are feeling the consequences,” Reeves said in response to Friday's data.

On Thursday, US President Donald Trump threatened to slap a 200% tariff on wine, cognac, and other alcohol imports from Europe, opening a new front in a global trade war that has roiled financial markets and raised recession fears.

Reeves is due to present new economic and fiscal forecasts from the Office for Budget Responsibility in her March 26 Spring Statement, with weak growth and higher borrowing costs eating into the slim margin against which she met her fiscal rules in October's budget.

Reeves has said the fiscal rules are non-negotiable and has indicated she will cut public spending if needed to ensure they are not broken.