The UK economy entered the Middle East crisis after a weak start to the year, according to official figures showing flatlining January output before the US-Israel war on Iran hit global energy prices.
Figures from the Office for National Statistics (ONS) showed zero growth in gross domestic product (GDP), down from an increase of 0.1% in December, as the economy failed to recover from uncertainty surrounding the chancellor Rachel Reeves’s autumn budget.
Falling significantly short of City predictions for growth of 0.2%, the figures came as the UK and other countries faced a potentially severe economic hit as the Middle East conflict drove up oil and gas prices, hitting consumers with higher living costs.
Oil prices rose past $100 a barrel on Thursday for a second time this week, as widespread Iranian attacks on energy facilities across the region overshadowed a vast release of government reserves.
Analysts said that if sustained, higher energy prices would drive up inflation, dashing hopes of an interest rate cut from the Bank of England next week. Financial markets anticipate Threadneedle Street could be forced to increase borrowing costs next year.
Against an increasingly volatile backdrop, Reeves is expected to use a speech early next week to spell out Labour’s plan for the economy amid growing calls for an emergency energy support package.
Experts said sharply rising living costs, alongside heightened geopolitical uncertainty, would damage consumer spending and business confidence, with the potential to trigger a recession if the conflict was sustained.
The economy grew by 1.3% in 2025, an improvement on growth of 1.1% in 2024, although worse than official forecasts of 1.5% amid uncertainty over tax increases and the health of the public finances.
More details to follow soon …
