UK economy ekes out growth in final months of 2025 – ONS

The UK economy grew modestly in the final three months of last year amid budget uncertainty and a subdued performance in December, according to official figures.

The Office for National Statistics (ONS) said gross domestic product (GDP) rose by 0.1% in the fourth quarter, following growth of 0.1% in the previous three months.

The ONS estimated the economy expanded by 0.1% in December.

The fourth quarter figures mean the economy grew by 1.3% overall in 2025, up from 1.1% in 2024 and the highest growth since 2022, but lower than the 1.4% expected by the Bank of England and most economists.

Liz McKeown, ONS director of economic statistics, said: “The economy continued to grow slowly in the last three months of the year, with the growth rate unchanged from the previous quarter.

“The often-dominant services sector showed no growth, with the main driver instead coming from manufacturing.

“Construction, meanwhile, registered its worst performance in more than four years.

“The rate of growth across 2025 as a whole was up slightly on the previous year, with growth seen in all main sectors.”

It follows a volatile end to 2025 for the British economy, with output declining by 0.1% in October and then rebounding by a downwardly revised 0.2% in November as the manufacturing sector was boosted by recovering production at Jaguar Land Rover after its major cyber attack.

Budget uncertainty added to pressure in the quarter, with the long lead-up widely seen holding back growth ahead of the November 26 fiscal event.

Chancellor Rachel Reeves gave little justification for the muted end to the year, but insisted the Government “has the right economic plan to build a stronger and more secure economy, cutting the cost of living, cutting the national debt and creating the conditions for growth and investment in every part of the country”.

The figures showed the UK’s dominant services sector flatlined in the fourth quarter with zero growth, while production expanded by 1.2% and construction fell by 2.1%, marking the sector’s worst growth for over four years.

Scott Gardner, investment strategist at JP Morgan Personal Investing, said the UK economy “ended 2025 firmly in the slow lane, undershooting expectations and remaining in a low gear in the final quarter of the year as businesses and consumers digested the Chancellor’s November budget”.

“This marks a clear reversal in fortunes for the economy after strong growth shown in the first half of the year failed to carry over into the rest of 2025,” he added.

The data showed the JLR shutdown following its cyber attack had a lingering effect, having contributed towards a 1.2% fall in motoring production as a whole in the fourth quarter, compared with the previous three months.

There was also a steep fall in business investment during the closing months of 2025, down 2.7% in the fourth quarter, which was the biggest decline for four years.

Shadow chancellor Sir Mel Stride said: “These disappointing statistics show a Downing Street and a Treasury that have taken their eye off the ball.”

He said they are “distracted by scandals of their own making as Sir Keir Starmer’s authority crumbles”.

Experts said more recent economic indicators had shown signs of an improvement at the start of 2026, but the broader outlook for UK growth is still muted.

The Bank of England last week cut its growth forecasts for the next two years, from 1.2% to 0.9% for 2026, and from 1.6% to 1.5% for 2027.

The Bank’s GDP downgrades put a March interest rate cut in focus and experts said the latest GDP figures reinforce those expectations.

Rob Wood, at Pantheon Macroeconomics, said he expects growth to pick up to 0.4% in the first three months of 2026, though he believes this will not stop policymakers cutting rates next month.

He said: “Today’s data do little to dissuade Monetary Policy Committee doves from pushing ahead with a rate cut in March, but we think economic momentum will make March the last MPC cut of this cycle.”