UK Economy Records Modest 0.1% Growth in Final Quarter of 2025

Modest Expansion Continues for UK Economy

The United Kingdom's economy registered a modest growth of 0.1% in the final quarter of 2025, spanning October to December, according to official data released by the Office for National Statistics (ONS). This figure mirrors the 0.1% growth recorded in the third quarter of the same year, indicating a sustained period of subdued economic expansion. The annual growth for the entirety of 2025 is estimated at 1.3%, an increase from 1.1% in 2024.

The latest quarterly growth figure fell slightly below the 0.2% forecast by economists polled by Reuters and the Bank of England, highlighting a softer-than-anticipated end to the year for the British economy.

Sectoral Performance: A Mixed Picture

An analysis of the individual sectors reveals a varied performance contributing to the overall modest growth:

• Production Sector: This sector saw a significant increase of 1.2% in the fourth quarter. Manufacturing was a key driver within production, benefiting from the normalisation of car output following a cyberattack that impacted Jaguar Land Rover in the third quarter.
• Services Sector: Despite being the dominant component of the UK economy, the services sector reported no growth, effectively flatlining during the period.
• Construction Sector: This sector experienced a notable contraction, falling by 2.1%. This marks its weakest performance in over four years.

Underlying Factors and Economic Headwinds

Several factors are believed to have influenced the UK's economic performance in late 2025. Speculation surrounding the Finance Minister's Budget in November 2025 contributed to uncertainty, which in turn impacted business investment. Business investment saw a significant decline of almost 3% in the fourth quarter, marking the largest quarter-on-quarter drop since early 2021. The lingering effects of past interest rate hikes by the Bank of England are also cited as a contributing factor, particularly affecting the construction sector.

Furthermore, real GDP per head is estimated to have fallen for the second consecutive quarter by 0.1% in Q4 2025, suggesting that per capita economic output is declining. The continued modest growth puts additional pressure on the Bank of England to consider further interest rate adjustments to stimulate the economy.