NEW GDP data shows the UK economy posted zero growth in January with experts saying “the risk of recession looks far more serious now” and warning that these figures don’t even take into account the effect of the Middle East crisis.
Official data published this morning shows that, in January 2026, the UK economy delivered zero growth, following growth of 0.1% in December and 0.2% in November 2025.
Services showed no growth, production fell by 0.1%, and construction grew by 0.2% in January 2026. And this all before the impending energy crisis due to the war in the Middle East which is expected to push up inflation.
Meanwhile, in the three months to January 2026, compared with the three months to October 2025, GDP grew by 0.2%, following growth of 0.1% in the three months to December, and no growth in the three months to November 2025.
Services output grew by 0.2%, after showing no growth in the three months to December 2025, production output grew by 1.3%, after growth of 1.2% in the three months to December 2025 — while construction output fell by 2.0%, following falls of 2.1% in the three months to December and of 0.9% in the three months to November 2025.
Liz McKeown, Director of Economic Statistics at Office for National Statistics, said: “Growth ticked up slightly in the latest three months, partly reflecting the recovery of car manufacturing, following the cyber incident in the Autumn. Within services, which also increased, wholesale continued to rebound from a weak summer.
“However, the overall picture remains subdued, with no growth in the latest month. There was another large fall in the construction industry in the latest three months, with continued contraction in housebuilding.”
The risk of recession looks far more serious now
Stephen Perkins, Managing Director at Norwich-based Yellow Brick Mortgages, said the figures are unsurprising.
He added: “These GDP results are a harrowing scorecard of the government’s economic policy, but unsurprising given the number of businesses on their knees.
“The greatest concern is these do not yet reflect the impact of the latest global financial crisis from the war in Iran. Tough times lay ahead for everyone in the UK.”
Martin Rayner, Director at Compton Financial Services, said it was the “perfect storm” that could lead to stagflation.
He added: “The figures highlight just how fragile the UK economy currently is. Growth has effectively stalled and, with oil prices rising due to global tensions, the risk is that inflation pressures persist while the economy struggles to expand. At the same time, businesses are facing higher costs from increased National Insurance contributions, greater employment regulation and ongoing tax uncertainty.
“When the cost of employing people rises, it inevitably reduces the capacity for businesses to invest, hire and grow. Combine those domestic pressures with global instability and higher energy prices and it starts to look like a perfect storm for stagnation at best, and potentially stagflation if inflation proves sticky. Confidence isn’t collapsing, but businesses and investors are clearly becoming more cautious about the outlook.”
Buckle up
Rohit Kohli, Director at Romsey-based The Mortgage Stop, said the risk of recession is now high.
He continued: “January’s zero-growth reading was weak enough on its own, but the bigger concern is that this data only captures the economy before the war in Iran fed through properly into energy markets. That matters because Iran is not a side issue here. It is a major part of the risk.
“With oil pushing sharply higher, the pressure feeds into inflation expectations, gilt yields, swap rates and mortgage pricing. That is how stagflation starts to become a real threat: no meaningful growth, rising household costs and borrowing becoming more expensive again. Confidence is low, and unless the situation in Iran cools quickly, the risk of recession looks far more serious now.”
Colin Low, Managing Director at Ipswich-based Kingsfleet, warned Brits to “buckle up”.
He added: “Lent may have begun last month, but with today’s report of a continuing flat economy in January, we have this year’s second Pancake day. Thinking back to those heady days before the last election, the Labour Party promised us that their focus would be on delivering growth to fund their planned improvements for public services.
“So, what do they have to show, 18 months on? Zero. No growth and a total of 0.3% over the last quarter. There can be multiple reasons put forward to explain this, but increasing tax on small businesses and entrepreneurs will certainly have removed incentives for growth in the usually dynamic areas of the economy.
“The Iran war and the inflationary impact of the scarcity of oil is yet to be shown in economic data but, as of now, the rest of this year does not bode well at all. Buckle up.”
The UK is stuck in Groundhog Day
Riz Malik, Independent Financial Adviser at Southend-on-Sea-based R3 Wealth, said the UK is in trouble.
He continued: “It seems like the UK is stuck in Groundhog Day when it comes to economic news, and we are constantly repeating the same tales of woe. Currently, the biggest threat to UK Plc’s economic outlook is US foreign policy and Trump-economics.
“The longer this conflict continues, the greater the chance we enter the mother of all economic slumps and soaring inflation. That combination would leave households and policymakers facing a very difficult period.”
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, said these figures add “salt to the wounds” of the UK.
He added: “If the conflict hasn’t already made life difficult for the economy, flatline GDP figures for January just adds salt to the wounds of battle for the UK population.
“The conflict will end up a somewhat welcome distraction for the government, as it looks to dodge key decisions and blame everyone else instead. Construction figures are hugely disappointing, making it near impossible for Labour to achieve its target for home building, driving prices higher artificially.”
Construction figures are hugely disappointing
Ranald Mitchell, Director at Norwich-based Charwin Mortgages, said once the Iran conflict is priced in then the UK will be hit hard.
He continued: “Britain is being hit by a brutal double blow as growth stalls and oil prices surge. This should be setting off alarm bells. The economy has already ground to a halt, and that is before higher energy costs have fully worked their way through to households and businesses.
“If this continues, the UK risks being trapped in the worst kind of squeeze with flat growth, rising bills and families feeling poorer by the month. Unless the conflict in Iran is brought under control quickly, the outlook for UK households is becoming increasingly grim.”
Craig Fish, Director at London-based Lodestone Mortgages, said these figures are a fallout of the Autumn Budget.
He added: “Today’s figures shouldn’t surprise anyone. Much of this is direct fallout from the Autumn Budget, which spooked developers, stalled investment and added costs the construction sector is still absorbing. The 2% fall in construction output and continued contraction in housebuilding reflect that damage.
“With the Middle East conflict now driving energy costs higher and inflation back in the frame, rate cuts look increasingly unlikely removing one of the few remaining lifelines for hard-pressed borrowers. Government needs dynamic, decisive thinking.
“Stamp duty reform would be an immediate start freeing up stock and giving buyers a reason to act. But that alone won’t be enough. Housebuilding needs urgent stimulus and mortgage affordability must be central to any recovery plan.The housing market is being squeezed from every direction. Without bold policy reform, there is no clear path out.”
Elliott Culley, Director at Hayling Island-based Switch Mortgage Finance, said no one has an answer to the UK’s woes.
He continued: “With the latest economic figures showing absolutely no growth, the threat of stagflation has truly embedded itself into the UK economy.
“The current Iran conflict will only make these figures worse unless a resolution is found quickly. The tough times look to continue and no one seems to have an answer currently.”
Photo by Markus Winkler on Unsplash.
