Are we on the brink of a recession?

The City of London is being "stalked" by fears of a recession as official figures show the UK economy shrank by 0.1% in January in a blow to Labour's growth ambitions.

The unexpected contraction, reported by the Office for National Statistics (ONS), is a "sharp turnaround" after the "robust" 0.4% growth seen in December, said London's The Standard.

It comes just weeks before Chancellor Rachel Reeves delivers her Spring Statement, which is expected to include further cuts in public spending to keep within her fiscal rules.

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What did the commentators say?

Responding to the new figures, Reeves said Britain was "feeling the consequences" of global events, widely interpreted as a reference to Donald Trump's imposition of trading tariffs and the ongoing Ukraine peace negotiations.

But "worryingly" the ONS data covers a period before Trump "unleashed turmoil" on world stock markets with his punitive tariffs, said The Standard. Rather, "big slumps" in output from the UK manufacturing sector and North Sea oil and gas production appear "largely to blame for the drop".

Tariffs might be disrupting the world economy, "but let’s not rewrite history here", said Camilla Tominey in The Telegraph. Economists "all seem to agree" that the reason for Britain's sluggish growth is that the government is "taxing the living daylights out of businesses". Bosses are having to contend with "costly employment measures they can ill afford", including an increase in employer National Insurance contributions and a hike in the minimum wage. But expect "more of this 'world forces beyond our control' rhetoric", said Tominey. "Reeves knows that if the UK does go into recession, as is increasingly being predicted, then she'll face legitimate calls to resign."

And a further slowdown in hiring could suggest the UK is heading towards a recession, said The Resolution Foundation. The think tank calculated that the 0.5% drop in employment in the year to January is consistent with a slowdown "only seen during a recession".

That's further bad news for Reeves' financial wiggle room. A slowing labour market "reduces tax revenues for the government" and means the chancellor could break her own fiscal rules to the tune of £4.4 billion when the latest estimates are released at the end of March, said The Times.

What next?

While the ONS figures do not "appear to point to a recession" yet, UK companies are operating against a "weak backdrop" while also wrestling with the "uncertainty created by the White House's on-off tariffs policies", said The Guardian.

But in a further blow to Labour's plan to kickstart the economy, the OECD has downgraded Britain's growth prospects. It now forecasts the UK’s economy to grow by 1.4% this year and then just 1.2% next year, compared to the 1.7% and 1.3% it had previously estimated. The OECD does see Britain still growing, said The Spectator, "albeit painfully slowly", but the downgrade will only add to fears that we could soon be "heading for recession".