The United Kingdom's economy grew by a small margin in the final three months of 2025. Official figures indicate a 0.1% expansion in the fourth quarter, following a 0.2% increase in December. While this shows a continuation of growth, it suggests the economy is moving at a slow pace. Economists are watching closely, with some predicting a potential cut in interest rates by the Bank of England in April to encourage more robust economic activity.
Economic Performance in Late 2025
Official data from the Office for National Statistics (ONS) shows that the UK economy grew by 0.1% in the fourth quarter of 2025. This followed a monthly expansion of 0.1% in December. The overall annual GDP growth for 2025 was 1.3%, which was noted as being higher than many initial expectations.
The services sector, a major part of the UK economy, showed no growth during the fourth quarter. This is the first time in two years this key sector has failed to expand.
In contrast, the manufacturing sector provided a boost to the economy.
The construction sector experienced its worst performance in over four years, a significant drag on overall growth.
Key Economic Indicators and Expert Views
The economic picture presented by the ONS data is described as mixed. While the economy is growing, the rate is slow, and specific sectors are struggling.
Read More: UK Economy Grew Very Little at End of 2025
"The economy continued to grow slowly in the last three months of the year, with the growth rate unchanged from the previous quarter." - Liz McKeown, ONS Director of Economic Statistics.
Concerns among business leaders, as shown in surveys, include taxes and rising inflation as their top worries.
Former Treasury minister Lord O’Neill commented that while the Q4 growth figures might not seem highly significant on their own, other data for January, such as retail sales, has been "surprisingly stronger than people expected." He also noted that the "underlying productivity of the economy is showing tentative signs of finally starting to improve."
Investec Economics' Sandra Horsfield expressed a more positive outlook for the near future, suggesting that the Autumn Budget had less of a negative impact on economic activity than initially thought. She also pointed to consumer spending showing stronger signs of recovery, driven by real wage growth leading to increased retail and online spending.
Read More: Amazon Prime Was Faster and Saved People Money in 2025
Sectoral Performance and Challenges
The performance of different economic sectors reveals varied trends:
| Sector | Q4 2025 Performance | Notes |
|---|---|---|
| Services | No growth | First time in two years this sector has not expanded. |
| Manufacturing | Main driver of growth | Provided a boost to the overall economy. |
| Construction | Worst performance in over four years | Significantly impacted overall economic output. |
Despite the overall subdued growth, specific areas within the services sector, such as travel agencies, tour operators, and administrative support services, showed strong performance.
Policy and Market Reactions
The subdued economic performance and the performance of key sectors have led to discussions about potential monetary policy adjustments. Experts believe the latest GDP figures reinforce expectations for the Bank of England to cut interest rates in March, aiming to stimulate the economy.
The pound sterling remained flat against the dollar at $1.3624 following the release of the data.
Read More: UK Trade Gap for Goods Is Biggest Ever
Chancellor Rachel Reeves stated that government actions had set the stage for the Bank of England to lower interest rates. She also claimed that Britain is now the fastest-growing economy in the G7 group of European nations, despite the modest overall growth.
Conclusion and Outlook
The UK economy ended 2025 with modest growth, characterized by a 0.1% increase in the fourth quarter. While this represents a continuation of economic activity, the pace is slow, with the dominant services sector showing no growth and the construction sector experiencing a significant downturn. Manufacturing provided a crucial boost, and some signs of improvement in productivity and consumer spending offer tentative optimism. The data suggests that policymakers are considering measures, such as interest rate cuts, to invigorate the economy. Future performance will likely depend on the recovery of key sectors and the effectiveness of economic policies in addressing concerns like inflation and taxes.
Sources
CNBC: UK economy ekes out 0.1% growth in the fourth quarter
Link: https://www.cnbc.com/2026/02/12/uk-q4-gdp-economy.html
BBC News: UK economic growth 'subdued' in 2025, as GDP rises by 0.1% in final quarter - live updates
The Guardian: UK economy ends 2025 ‘in the slow lane’ after growing just 0.1% in Q4 – business live
Link: https://www.theguardian.com/business/live/2026/feb/12/uk-gdp-report-economy-december-q4-2025-growth-rachel-reeves-budget-news-updates
Independent: UK economy ekes out growth in final months of 2025 – ONS
Link: https://www.independent.co.uk/news/business/ons-gdp-construction-holly-williams-b2918820.html
BBC News: UK economy grew by 0.1% in final quarter of 2025
Read More: UK Economy Grows Very Little, Making People Worry Before Budget
