Why the financial system will not be but listening to the chancellor’s battle cry

Because the flip of the 12 months the chancellor Rachel Reeves has had a single precedence, repeated loud and clear at each alternative; progress.

It was a battle cry repeated from Beijing to Cape City through Davos and repeatedly at residence however, judging by figures for January, the financial system will not be but listening.

A contraction in GDP of 0.1% was beneath economists’ consensus of an analogous quantity of progress within the first month of the 12 months. Following a bigger than anticipated constructive bump of 0.4% in December, it confirms the development established within the second half of 2024 of an financial system bumping alongside at round zero.

Cash newest: Enhance for Brit holidaymakers over £6 ‘euro-visa’

Lodging and pub and restaurant gross sales had been down, with a rise in meals gross sales indicating much more individuals than in a usually parsimonious January selected to entertain themselves at residence.

There are caveats. That is only a single month’s information (and lacking commerce figures that the ONS has delayed after discovering “errors”) however each strikes are trigger for concern.

These numbers solely cowl the primary ten days of Donald Trump’s second time period and the impacts of his tariffs regime won’t present up within the information for a number of months but, however it’s protected to say elevated prices on metals exports will probably be unhelpful.

The slowdown in hospitality additionally highlights the upcoming impression of Rachel Reeves‘ first funds, which takes impact subsequent month. Enterprise teams say the rise in worker Nationwide Insurance coverage charges and thresholds, undeniably a price to enterprise, has had a chilling impact on plans for funding and the expansion it would generate.

Ms Reeves is aware of this, and the damaging sentiment partly explains a mantra that has seen help for a 3rd runway at Heathrow and a second at Gatwick, and each space of public coverage, from planning to scrub energy to defence spending, yoked to her progress mission.

The problem for the chancellor is that these are strategic coverage selections that will probably be judged over years not months, and she or he has solely 12 days till she has to ship a spring assertion anticipated to indicate all her room for manoeuvre squeezed by low progress and better borrowing prices.