The United Kingdom (UK) economy failed to grow in January, with GDP remaining flat at 0%, missing forecasts of a 0.2% increase.
According to reports, the economy remaining flatline for the first month of the year was worse than expected, and comes after a small 0.1% growth in December.
The overall picture is “subdued”, said the Office for National Statistics (ONS), while analysts called it a “disappointing start to the year”.
According to the BBC, the figures underscore that the economy was fragile even before the start of the US-Israeli war with Iran, which has caused a major energy shock that could have a ripple effect around the world.
Prime Minister Sir Keir Starmer also warned on Monday that the longer the war lasts, the more likely it is that there will be an effect on the UK economy, citing the concerning stagnant economy, especially with the way the ongoing conflict in Iran pushing global energy prices higher.
According to reports, the fuel prices are going up at the pump, and people using heating oil are feeling the pinch.
However, households on the Ofgem energy price cap are protected from higher energy costs until July, stating that it could push up inflation, which, before the conflict, was on track to reach the Bank of England’s 2% target by spring.
BBC also reports that the higher inflation might mean interest rates stay higher for longer, stating that before the Iran conflict, experts thought the Bank of England might lower rates in March, but now they believe it’ll stay the same next week, citing that this shift has already impacted mortgages, with lenders pulling deals and average rates hitting levels not seen since last year.
Should the war be prolonged, analysts say the conflict risks hitting household spending and could jeopardise Labour’s priority to grow the economy.
Chancellor Rachel Reeves said: “Our economic plan is the right one, but I know there is more to do.
“In an uncertain world, we are building a stronger and more secure economy by cutting the cost of living, cutting national debt and creating the conditions for growth to make all parts of the country better off.”
Shadow chancellor Sir Mel Stride also said Labour’s “economic mismanagement” had left the UK vulnerable to the Iran war’s potential ramifications.
“They must now axe the fuel tax, back North Sea oil and gas and come forward with a proper plan to cut the deficit and get the benefits bill down,” he said.
