The UK economy saw an unexpected contraction of 0.1% in January, raising concerns for businesses and policymakers alike ahead of the Chancellor’s upcoming Spring Statement.
The decline, primarily driven by a slowdown in the manufacturing sector, has added pressure on the government’s efforts to stimulate economic growth.
Economic forecasts had anticipated modest growth of 0.1%, following a 0.4% expansion in December. While monthly economic data can be volatile, figures from the Office for National Statistics (ONS) indicated a 0.2% growth over the three months leading to January. Despite this, the broader economic outlook remains subdued.
The hospitality and licensed trade sector has been particularly mindful of economic headwinds, as businesses contend with rising operational costs.
April will bring further financial challenges, including increases in National Insurance contributions, minimum wage hikes, and reductions in business rates relief. Many in the industry fear these changes could restrict investment, limit job creation, and squeeze profit margins.
Kate Nicholls, Chief Executive of UKHospitality, said: “The economy unexpectedly shrinking in January demonstrates how important action to kickstart the economy is.
“Increasing costs across the board are putting intense pressure on both businesses and consumers, and this will only intensify in April, when £3.4 billion hits hospitality businesses.
“Hospitality growth had been storming ahead in November and December but, like the economy, contracted in January.
“This shows how vulnerable businesses are and emphasises the need for action at the Spring Statement to reduce costs and boost business confidence.
“With the right measures, namely delaying the lowering of the employer NICs threshold, hospitality has proven to be a sector that can react most strongly and deliver much-needed economic growth, alongside social value.”