UK Economy Grows Very Slowly at End of 2025

The UK economy grew by a very small amount, 0.1%, in the last part of 2025. Manufacturing helped, but services did not grow. This slow growth makes people wonder about the economy's future.
By Newsroom | Economy, United Kingdom |

The British economy showed signs of very slow growth in the final three months of 2025, with an increase of just 0.1%. This figure suggests a year of overall subdued activity, leaving many to question the pace of economic recovery and its impact on businesses and individuals.

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Economic Landscape: A Picture of Slowdown

Official figures from the Office for National Statistics (ONS) indicate that the UK economy expanded by a mere 0.1% between October and December 2025. This modest growth follows a year characterized by what is widely described as "subdued" economic performance. The ONS's Director of Economic Statistics, Liz McKeown, highlighted a mixed economic picture.

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  • Manufacturing Sector: Showed a strong performance, acting as a significant driver for the growth recorded in the final quarter.

  • Services Sector: Experienced stagnation, showing no growth and flatlining for the first time in two years.

  • Construction Industry: Continued to show weakness during this period.

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Month-on-month data for December revealed a 0.1% expansion, a decrease from the 0.2% growth observed in the preceding month. This deceleration raises further questions about the economy's momentum as it entered the new year.

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Varied Reactions to Economic Data

The release of these economic figures prompted immediate responses from political leaders and industry representatives, revealing differing interpretations and concerns.

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  • Prime Minister Keir Starmer acknowledged the growth, stating, "our economy is growing," but also conceded that "there's more to do" to alleviate the pressures of the cost of living.

  • Tory leader Kemi Badenoch offered a critical perspective, asserting that the figures indicate "our country is stuck in the slow lane."

  • Business groups, such as the British Chambers of Commerce, have called for increased government action to address cost pressures, with head of research David Bharier warning of a "persistent low growth trap."

  • Economist Jim O'Neill provided a slightly more optimistic view, noting that the annual growth figure was "quite a bit higher" than some had anticipated at the beginning of the year.

Factors Influencing Economic Activity

Several factors appear to have influenced the economic performance at the end of 2025. Uncertainty surrounding the government's budget, particularly in the lead-up to Rachel Reeves' budget announcement in late November, is cited as a reason for businesses and consumers adopting a cautious "wait-and-see" approach. This uncertainty is believed to have weighed on business investment and consumer spending.

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While expectations of significant tax rises did not fully materialize, the preceding period of anticipation seemingly had an effect on economic decision-making.

Broader Economic Signals

Amidst the concerns about slow GDP growth, other economic indicators presented a more complex picture:

  • Interest Rates: A deputy governor from the Bank of England suggested that interest rate cuts could be expected in the coming meetings, implying a need to stimulate the economy. Economists predict a potential cut in April.

  • Mortgage Arrears: The proportion of mortgages in arrears remained low, at 0.92% for homeowner mortgages and 0.5% for buy-to-let mortgages.

  • Stock Market: Despite the weak economic growth figures, the London stock market reached another record high on the day of the ONS announcement.

Economic Outlook and Challenges

The 0.1% growth in the final quarter of 2025 underscores the ongoing challenge of achieving robust and sustainable economic expansion. While manufacturing provided a boost, the weakness in construction and the stagnation in services highlight areas requiring attention. The perceived impact of budget uncertainty on business and consumer behavior also points to the importance of clear and stable economic policy.

Read More: Keir Starmer Faces Questions After Top Civil Servant Leaves and Controversial Appointments

Moving forward, stimulating demand, supporting key sectors, and fostering business confidence will be critical. The central bank's potential interest rate adjustments will also play a significant role in shaping the economic environment in the immediate future.

Sources

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Frequently Asked Questions

Q: How much did the UK economy grow at the end of 2025?
The economy grew by 0.1% between October and December 2025. This is a very small amount.
Q: What parts of the economy did well?
The manufacturing part of the economy grew well. This helped the total growth.
Q: What parts of the economy did not do well?
The services part of the economy did not grow at all. The construction industry also showed weakness.
Q: Why was the economy growing so slowly?
People were not sure about the government's budget plans. This made businesses and people wait before spending or investing money.