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Fri, 13 Mar 2026

Fri, 13 Mar 2026 UK economy flatlines in January as people cut back on eating out

Analysts had been expecting 0.2% growth for the UK economy at the beginning of the year.
The UK economy has stagnated, failing to grow in January due to a decline in eating out at restaurants and other service sector activities. The zero growth rate was lower than expected, following a 0.1% increase in December. The Office for National Statistics (ONS) described the economic picture as "subdued", while analysts called it a "disappointing start" to the year. This comes ahead of the outbreak of war between US and Iran, which could have a significant impact on global energy prices and the UK economy. The increased fuel costs are already being felt by households, with prices at petrol pumps rising, while those under Ofgem's energy price cap will be protected from further increases until July. This may lead to higher inflation rates, potentially affecting interest rates and the mortgage market. Analysts had previously predicted that interest rates could be cut as early as March, but now expect a hold when the Bank of England meets next week. The conflict in Iran has already had an impact on the economy, with hundreds of mortgage deals being pulled by UK lenders this week, leading to average interest rates rising to levels not seen since last spring and summer. The prolonged conflict could potentially affect household spending, making it harder for Labour's government to achieve its goal of growing the economy. The ONS reported that GDP (Gross Domestic Product) remained unchanged in January, with the services sector showing no growth. Within this, food and drink service activities fell by 2.7%. Meanwhile, production fell by 0.1% and construction grew by 0.2%. In a broader context, the UK's economy had already been facing challenges due to consumers' concerns about tax increases and rising unemployment. The Office for Budget Responsibility (OBR) has revised its prediction for economic growth this year from 1.4% to 1.1%. Yael Selfin, chief economist at KPMG UK, said that "growth is likely to remain elusive" due to sharply rising energy prices and higher government borrowing costs. Shadow Chancellor Sir Mel Stride criticized the government's handling of the economy, saying that Labour's "economic mismanagement" had left the country vulnerable to the potential consequences of the Iran conflict.