ONS figures show flat GDP in January, with housebuilding still contracting and funding conditions under strain
The UK economy recorded no growth in January 2026, official figures showed, as a sustained fall in construction output added to concerns over housing supply.
Data from the Office for National Statistics (ONS) indicated that monthly gross domestic product (GDP) was unchanged, compared with 0.1% growth in December. The reading was below City expectations of a 0.2% rise.
GDP grew 0.2% in the three months to January 2026. Services (+0.2%) and production (+1.3%) both grew but construction (-2.0%) contracted.
— Office for National Statistics (ONS) (@ONS) March 13, 2026
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The figures come as markets assess the potential economic impact of renewed conflict in the Middle East, which has pushed oil and gas prices higher and raised the prospect of further pressure on household budgets. It also follows a period of uncertainty linked to chancellor Rachel Reeves’s Autumn Budget.
Over the three months to January 2026, real GDP rose by 0.2% compared with the previous three-month period, after a 0.1% increase to December. Services output increased by 0.2% in the latest three months, while production rose by 1.3%.
Construction, however, fell by 2% in the three months to January, following declines of 2.1% to December and 0.9% to November. The ONS said this was the fourth consecutive three-month fall for total construction output.
Source: Office for National Statistics
“Growth ticked up slightly in the latest three months, partly reflecting the recovery of car manufacturing, following the cyber incident in the Autumn,” said Liz McKeown, ONS director of economic statistics.
“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.”
Within construction, both new work and repair and maintenance declined over the three-month period, down by 3.2% and 0.4% respectively. Seven of the nine construction sectors contracted, with private new housing cited as the largest drag after a 6.3% fall.
On a monthly basis, construction output was estimated to have risen by 0.2% in January 2026, ending a run of three consecutive monthly declines. The increase was driven by repair and maintenance, which rose by 3.3%, while new work fell by 2.0%.
The weakness in housebuilding is likely to be watched closely by mortgage lenders and brokers, given the link between new supply, housing transactions and pipeline volumes. Developers’ ability to start and complete schemes also affects demand for development finance and can influence the pace at which new stock reaches the market.
“A fall in housebuilding output will disappoint policymakers, but it will not surprise anyone working in the sector,” said Neil Leitch (pictured right), managing director of development finance at Hampshire Trust Bank. “Developers have been operating in very challenging conditions and the industry is still struggling to regain momentum.
“The deeper issue is viability. Planning delays remain a major constraint, but the pressure is broader than that. Policy costs have increased, inflation uncertainty has returned and funding conditions are less predictable than many expected coming into the year.
“Wider geopolitical instability, particularly the recent volatility in energy markets linked to tensions in the Middle East, is another reminder of how quickly input costs can shift and why margins across the sector remain under pressure.”
For Leitch, demand for new homes is not the issue. “The challenge is creating the conditions that allow developers to move from approval to start with confidence,” he said.
“Decisions delayed today, or schemes that no longer work commercially, will feed through into weaker housing output in the years ahead. That said, well-structured projects with realistic assumptions and strong funding support are still progressing. Developers who plan conservatively and work with experienced lenders are better placed to navigate the uncertainty and keep delivery moving.”
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