Deutsche Bank’s Chief UK Economist Sanjay Raja notes that January 2026 UK GDP showed no growth, disappointing expectations for a strong rebound after late-2025 weakness. He highlights broad softness across services, industry and construction, and warns that the Iran conflict, rising energy prices and higher uncertainty could further weigh on UK growth, real incomes, spending and investment.

Stalled GDP highlights mounting headwinds

"The January GDP report was not what the doctor ordered. We, alongside others, expected the UK economy to bounce back strongly after a tepid end to 2025. Instead, the economy stalled – showing no growth."

"What happened? The services economy was hit by weaker administrative and support services out (-2.3% m/m) – driven in large part by a fall in employment activities (-5.7% m/m). Hospitality was also hit (-1.8% m/m)."

"Our expectations for a strong start to the year have diminished. And with the Iran conflict bubbling in the background, further headwinds will drag UK growth lower. With energy prices rapidly rising, higher oil and gas prices will squeeze real disposable incomes, constraining spending and investment."

"To be sure, today’s data lays bare the underlying weakness in growth as well as a fragile labour market. The Bank of England faces an uncomfortable trade-off. This is not 2022."

"The MPC will need to navigate these trade-offs carefully to avoid dragging the UK into a more protracted downturn."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)