UK economy was flatlining even BEFORE Middle East crisis erupted amid alarm at looming inflation spike

The British economy was on a flat course even before the Middle East crisis broke out, according to depressing figures released today.

The fact that GDP posted no growth in January was worse than the 0.2 per cent analysts expected and dealt another blow to Rachel Reeves.

Although UK plc has remained marginally in the black over the past three months, this performance will raise alarm about resilience amid rising energy prices following US-Israeli attacks on Iran.

Ms Reeves insisted Labor’s economic plan remained ‘the right plan’ despite warnings that a rise in inflation could deal a huge blow to households and the public finances.

Markets now believe there is no chance of the Bank of England cutting interest rates this month, increasing the possibility of so-called ‘Stagflation’.

Official figures showed GDP grew at all in January, dealing another blow to Rachel Reeves

Ms Reeves insists Labor’s economic plan remains ‘the right plan’

ONS figures reveal the economy’s recent weak performance

There was a decrease in construction last year

ONS director of economic statistics Liz McKeown said: ‘Growth has risen slightly over the last three months, partly reflecting the recovery in car production following the cyber incident in the autumn.

‘Services also increased, while wholesale continued to recover after a weak summer. However, the general picture remains weak as there has been no growth in the last month.

‘As the contraction in housing construction continues, there has been another major decline in the construction sector in the last three months.’

Real GDP increased by 0.2 percent in three months. However, while the strong service sector stagnated in January, the 0.1 percent decline in production offset the 0.2 percent growth in construction.

Ms Reeves said: ‘Our economic plan is correct but I know there is more to be done. ‘In an uncertain world, we are building a stronger, more secure economy by reducing the cost of living, cutting the national debt and creating the conditions for growth that will make every part of the country better.’

The oil price rose again overnight, approaching $100 per barrel. The Strait of Hormuz, through which approximately one-fifth of the world’s supplies pass, has been effectively closed by Iran.

Brits are already feeling the pinch at the fuel pumps, although goods prices will take longer to recover and a cap on energy prices means bills won’t rise until July.

The UK government is preparing for a ‘worst case scenario’ in which the chaos in the Middle East will continue in the coming months.

Internal analysis is said to have concluded that if the fight continues into May, oil prices could reach $150 per barrel and gas costs could also rise.

According to Bloomberg, it will only be possible for prices to stabilize below $100 per barrel in the ‘best case scenario’ presented to ministers, in which the dispute ends within a few days.

Iran boasts that it has been able to reduce costs to $200.

The Resolution Foundation has warned that if oil prices remain at levels seen this week, the typical annual energy bill could rise by £500 when the cap changes in July.

This would more than offset the impact of government subsidies, which have helped cut costs by £117 a year from next month.

Although Donald Trump claims the war against Iran is ‘all over’, there is little sign that the turmoil will calm down.

Shadow chancellor Mel Stride said: Labour’s economic mismanagement has left us vulnerable to the potential impact of events in the Middle East.

‘They must now Repeal the Fuel Tax, support North Sea Oil and Gas and come forward with a viable plan to reduce the budget deficit and lower the aid bill.’

Reform’s Treasury spokesman Robert Jenrick said jobs were ‘disappearing’ as businesses struggled.

“These figures only prove publicly what Cabinet ministers have said privately: Rachel Reeves has no plan to grow our economy,” he said.

‘Every month a recession means businesses are struggling, more jobs are disappearing and bills are becoming harder to pay.

‘If the chancellor doesn’t have the resources to get the economy growing again, he needs to go.’

ICAEW Chief Economist Suren Thiru has warned of the threat of ‘stagflation’, with the Bank of England unlikely to cut interest rates until the Autumn at best.

“These figures confirm that the economy was treading water even before the significant economic shock caused by the conflict in the Middle East emerged, as weak services and industrial activity caused overall production to stifle in January,” he said.

‘The UK economy could return to modest growth in February, helped by stronger manufacturing and services output, particularly as almost all activity in the month predates the current turmoil.

‘It means that any continued momentum in the economy has by now evaporated, as the Middle East conflict, energy crisis and supply chain disruption are both pushing the UK closer to stagflation and eroding the Chancellor’s financial means.’

Wealth Club’s Susannah Streeter said the performance was ‘extremely disappointing’.

‘This does not bode well for the resilience of companies facing rising energy prices that are likely to see many businesses put their investment plans on hold and hope the storm will pass,’ he said.

‘Stagflation is rampant in the UK economy; As inflation prepares to rise, recession sets in and the risk of the economy going into reverse increases.’