Chancellor ‘determined to turn around’ economy amid surprise fall in GDP
Chancellor Rachel Reeves has vowed to “turn around the poor performance of more than a decade” after Britain’s economy contracted in the first month of the year.
Official figures showed gross domestic product (GDP) fell by 0.1% in January amid a sharp decline in the manufacturing sector, surprising economists who had forecast a slight increase.
It follows 0.4% growth in GDP in December, the Office for National Statistics (ONS) said, and comes as a blow to the Chancellor before her spring statement.
Labour has made growing the economy its key priority since winning the election last year but momentum has been slow amid falling consumer confidence and rising inflation.
Ms Reeves said on Friday: “This Government is determined to turn around the poor performance of more than a decade when it comes to growth and we need to go further and faster in growing our economy, in ensuring that we boost our national security and defence, and reforming our public services.”
Dampened
The ONS said the weak performance in the manufacturing and construction sectors was partly dampened by poor weather in January.
Meanwhile, the escalating global trade war started by US President Donald Trump has sparked concerns about future economic prospects.
The Chancellor would not be drawn into saying whether uncertainty caused by Mr Trump’s tariffs had influenced the slump in January, but said she “believes in free and open trade”.
While the immediate pressure on Ms Reeves eased after a jump in growth in the last month of 2024, the latest figures mark another setback.
Ms Reeves pointed to a recently-announced ramp-up in defence spending, plans to reform public bodies and changes to the planning system as part of measures to boost the economy.
Liz McKeown, the ONS director of economic statistics, said the fall came from “a notable slowdown in manufacturing”.
“However, services continued to grow in January led by a strong month for retail, especially food stores, as people ate and drank at home more.”
Growth
For the three months to January, GDP was estimated to have grown by 0.2%, driven by growth in the services sector, the ONS said.
Ms Reeves will deliver her spring statement on March 26, where increased borrowing costs and weak growth are likely to require spending cuts in order to meet her commitments on managing the public finances, experts have warned.
There are still worries over whether she will meet her fiscal rules, as well as the impact on businesses and jobs from employment tax rises in the October Budget which come in at the start of April.
Conservative shadow chancellor Mel Stride branded the Government a “growth killer”, blaming tax rises and proposed changes to employment rights.
Meanwhile, TUC general secretary Paul Nowak said the figures “show the need for public investment”.
He said: “Stronger growth is the best way to secure sustainable public finances.”
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Maybe if Reeves could look outside her narrow neo liberal monetarist policy she would find plenty of opportunities to increase the Treasury coffers and invest in public services. A land tax, a wealth tax, printing money to invest in infrastructure etc etc to name just a few.
Amen!
Taxing the rich and closing avoidance loopholes will make that money economically active again, rather than it sitting idle in a bank account. Once that money is circulating again, it’s ultimately going to get back to the government as tax, allowing a greater capacity for e.g. better rail services, public housing, etc. The only reason this hasn’t been considered can either be down to rank stupidity or rigid dogmatism, neither of which give me much faith in the country improving over the next twenty years.
New taxes are just an opportunity for advisers to find new loopholes. The focus should be on closing the gap that let Sunak pay an effective tax rate ten percent lower than Starmer.
Apparently she’s blaming Trump now: appear from the fact he’s on the other side of the Atlantic, he didn’t even take office until till January
The imperial comic article you’re quoting did begrudgingly acknowledged Trump was contributing to the problem:
“Still, both Reeves and Trump are due some credit for raising the risk of another slowdown.”
https://www.telegraph.co.uk/business/2025/03/14/rachel-reeves-about-cause-recession-or-will-trump/
Reeves is proving to be such an economics illiterate that I find it quite incredible that a financial institution would employ such an imbecile to take custody of its stock of paper clips let alone anything requiring some capacity for analysis and problem solving.