UK economy set to have recorded modest growth amid budget concerns

The UK economy is expected to have grown modestly again in the last three months of 2025 amid pressure from budget uncertainty, according to economists.

The Office for National Statistics (ONS) will shed light on how the economy fared when it reveals the latest UK GDP (gross domestic product) data for December, and the final quarter and year as a whole, on Thursday.

Economists have broadly predicted that the economy grew by 0.1% in the quarter, following growth of 0.1% in the third quarter.

But some have suggested that fourth-quarter growth could tip slightly higher after stronger-than-expected activity in November and that clarity following the autumn budget could have supported firms in the run-up to Christmas.

It comes after previous figures from the ONS showed that the economy contracted by 0.1% in October and then expanded by 0.3% in November as the manufacturing sector was boosted by recovering production at Jaguar Land Rover after its major cyber attack.

But December is predicted to have seen no growth, according to estimates by Pantheon Macroeconomics.

A number of industry surveys also pointed towards weak data for December, such as the month’s construction industry PMI survey data which showed a continued deep decline across housing, commercial construction and civil engineering.

But others suggested that improved certainty following the budget may have helped drive a rise in spending, albeit still at modest levels.

Victoria Scholar, head of investment at Interactive Investor, said: “it is likely that economic activity picked up after the budget once that cloud of uncertainty shifted to the rearview mirror in December.

“Plus, there could have been an improvement in the services sector with consumers spending on things like food and beverages, retail, and hotels around the festive season.”

The fourth quarter as a whole hampered by worries about the budget has seen key indicators point towards an improvement in the key services sector, as consumer spending rises.

Robert Wood, chief UK economist at Pantheon Macroeconomics, said GDP growth “could tip to 0.2%” as a result, but held his prediction of 0.1%.

He said: “We think the broad thrust from activity in the services sub-sectors in December indicates that budget uncertainty is already fading quickly.”

Investec experts are pencilling in growth of 0.2% for December and 0.2% for the fourth quarter as a whole.

This would leave annual growth at 1.4%, up from 1.1% in 2024.

Sandra Horsfield, at Investec Economics, said: “The big picture is that the UK economy had defied the gloomy popular narrative and outperformed expectations during 2025 – our forecast equates to GDP growth of 1.4% for the full year, whereas the consensus forecast in January 2025 had been for 1.2% GDP growth.

“We project a similar story of resilience and outperformance relative to consensus for 2026, as utilities investment and, eventually, housebuilding accelerate – the latter with a little help from further falls in interest rates too.

“The consensus forecast for this year is 1%, against our own forecast of 1.3%.”

Nevertheless, the broader outlook for UK growth is still muted.

The Bank of England said on Thursday last week it believes the economy grew by 1.4% last year, reducing its previous estimate of 1.5%.

It also cut its growth forecast for 2026, from 1.2% to 0.9%, and for 2027, from 1.6% to 1.5%.