Although January’s budget surplus was a record, at £15.4bn, it’s £5.1bn less than expected, which may lead to tax rises or spending cuts

• UK hiring on the rise as confidence lifts, research suggests
  

In other economic news, UK retail sales rebounded surprisingly strongly last month.

The Office for National Statistics reports that retail sales volumes rose by 1.7% in January.

This is the largest rise since March 2020, putting index levels at their highest since June 2023. This follows four consecutive falls on the month, ending in December 2024 when index levels were their lowest since April 2013.

Supermarkets, specialist food stores like butchers and bakers, and alcohol and tobacco stores all rose over the month. Retailers suggested that the increase was because of more people eating at home in January.

Borrowing costs remain under pressure as inflation proves stickier than expected, potentially slowing the Bank of England’s rate cuts and keeping debt servicing costs elevated.

At the same time, Labour’s commitment to increased defence spending adds further fiscal strain. So far, Reeves has held the line on Labour’s pledges, but with limited fiscal headroom, holding that line will become increasingly challenging.”