January brought the British economy a series of positive readings that could ease the task for Chancellor Rachel Reeves. The budget surplus reached a historic level of £30.4 billion thanks to high income tax receipts. At the same time, retail sales rose by 1.8%, the best result in nearly two years. The only cloud on the horizon is the situation in the services sector, where despite good PMI results, companies are still cutting jobs due to fiscal burdens.

Historic budget surplus

The UK budget recorded a surplus of £30.4 billion in January, the best result since data collection began in 1993.

Unexpected sales surge

Retail sales grew by 1.8%, significantly above forecasts, mainly thanks to jewelry and artworks.

Civil service appointment

Prime Minister Keir Starmer appointed Antonia Romeo to the position of Cabinet Secretary – she is the first woman in this role.

Pressure in the services sector

Despite the PMI index rising to 53.9, service sector companies are reducing employment due to higher taxes.

UK public finances recorded a record surplus of £30.4 billion in January, the highest figure since data collection began in 1993. This significant cash injection stems primarily from a wave of self-assessment tax payments and capital gains. This result is nearly double the surplus from the same period last year and is significantly better than market forecasts, which had assumed a figure around £24 billion. For Chancellor of the Exchequer Rachel Reeves, this provides crucial support ahead of the fiscal statement planned for March 3. Simultaneously, optimistic data arrived from the trade sector. Retail sales in the UK rose by 1.8% in January, the strongest monthly jump since May 2024. Consumers were more eager to buy jewelry, artworks, and dietary supplements, interpreted as a return to higher spending after a period of saving. This data contributed to a strengthening of the pound sterling, though it also prompted markets to more cautiously price in future interest rate cuts by the Bank of England. Since leaving the European Union, the British economy has been grappling with structural problems and high public debt, which in recent years has often exceeded 90% of GDP. Despite positive macroeconomic data, business sentiment remains mixed. The PMI for the services sector remained above the growth threshold, reaching 53.9 points, but companies are still reporting cost pressures. Service sector businesses, burdened by higher taxes imposed by the Labour Party government, continue to reduce headcount. At the same time, Prime Minister Keir Starmer made a historic appointment, naming Antonia Romeo to the position of Cabinet Secretary. She became the first woman in history to head the Civil Service, which is intended to accelerate state administrative reforms. 30,4 mld funtów — was the government's January budget surplus Retail Sales Indicators: Month-on-month sales growth: 0.4% (December) → 1.8% (January); Analysts' forecast: 0.2% → 1.8% (actual result) The Office for National Statistics (ONS) has been monitoring public finances in its current form since 1993, allowing for reliable comparisons of economic cycles. „The record surplus provides a solid foundation ahead of the spring fiscal statement, allowing for stabilization of public debt.” — Rachel Reeves Budget Surplus in January: 2024-01: 15.4, 2025-01: 24.1, 2026-01: 30.4

Mentioned People

  • Rachel Reeves — British Chancellor of the Exchequer preparing a report on public finances.
  • Keir Starmer — Prime Minister of the United Kingdom, who made a historic appointment in the civil service.
  • Antonia Romeo — First woman appointed to the position of Cabinet Secretary (head of the civil service).