UK Economy Grows Very Slowly

The UK economy grew very slowly at the end of 2025. The economy only grew by 0.1% in the last three months of the year. This slow growth is causing people to look closely at the government's plans for the economy.
By Newsroom | Economy, United Kingdom |

The United Kingdom's economic performance in late 2025 and early 2026 has been characterized by notably slow Gross Domestic Product (GDP) growth, a trend that has intensified scrutiny on Chancellor Rachel Reeves and the Labour government's economic strategy. The figures, published by the Office for National Statistics (ONS), reveal a GDP increase of just 0.1% for the three months leading up to December 2025. This rate of expansion is identical to the preceding three-month period, suggesting a prolonged period of low activity. For the entirety of 2025, the first full year under Labour's governance, the economy grew by 1.3%, a marginal acceleration from 1.1% in 2024. These statistics arrive as the government prepares for its spring statement and has prompted a range of reactions, from calls for more decisive action to critiques of existing fiscal policies.

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Economic Performance: A Detailed Overview

Official data from the ONS indicates a persistent pattern of subdued economic expansion. The 0.1% growth recorded in the final quarter of 2025, covering the period up to December, mirrors the growth seen in the quarter ending in September 2025.

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  • Quarterly Growth: The July-to-September 2025 period saw growth of 0.1%, with the economy showing no growth in its services sector during the fourth quarter.

  • Annual Growth: For the entirety of 2025, the UK economy expanded by 1.3%. This follows a 1.1% growth rate in 2024.

  • Monthly Volatility: September 2025 alone saw a slight contraction in economic activity, influenced by a significant drop in UK car production due to a cyber attack.

| Sector | Performance | Impact on GDP ||—-|—-|—-|| Services | No growth in Q4 2025 | Dragged down overall expansion || Production (including manufacturing) | Significant drag in May 2025; historic low in UK car production | Contributed to monthly contraction || Construction | Worst performance in over four years (specific period not detailed, but contextually relevant to recent data) | Negative contribution to growth |

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Policy Response and Public Reaction

The government, led by Chancellor Rachel Reeves, has acknowledged the challenges while maintaining that its economic plan is designed for sustained growth and stability.

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"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." - Statement attributed to the government.

Reeves herself stated, "there is 'more to do to build an economy that works for working people'," in response to the latest GDP figures. The government has pointed to initiatives aimed at reducing the cost of living, lowering national debt, and fostering investment across the country. However, these efforts have faced criticism.

  • Criticism of Government Approach: Critics argue that the Treasury has "taken its eye off the ball," citing the sluggish growth as evidence that the government has not adequately stimulated economic activity. Some commentators suggest the government's policies, particularly tax increases, may be counterproductive to growth.

  • Budget Speculation: There is an assertion that speculation surrounding the late November 2025 Budget negatively impacted economic activity towards the end of the year.

  • Policy Revisions: Reports indicate policy "U-turns" by the government, which some suggest have eroded public confidence and financial buffers.

Economic Outlook and Expert Opinions

While recent figures indicate a slowdown, some analysts suggest signs of potential improvement.

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  • Signs of a Pick-Up: Lord O'Neill, a former Goldman Sachs chief economist, pointed to stronger data for January 2026, including improvements in productivity, as indicators that the UK economy might be starting to accelerate. Economists also suggest a slight pick-up in the first half of 2026.

  • Monetary Policy: The Bank of England's Monetary Policy Committee is reportedly adjusting its stance, with a deputy governor suggesting that interest rate cuts are a "reasonable expectation" in the coming months. Some anticipate further rate cuts by the Bank of England to support growth.

  • Business Concerns: Business leaders have voiced concerns about persistent cost pressures. They are looking for government action on high industrial energy costs, collaboration on employment legislation, and progress on tax simplification to reduce the cost of doing business.

  • Sustained Growth Drivers: Doubts persist about what will drive a sustained increase in the underlying rate of growth, with economists finding it "hard to see" immediate catalysts.

Underlying Economic Pressures

Several factors are cited as contributing to the current economic climate and potential future challenges.

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  • Inflation and Fiscal Management: The UK is reportedly facing persistent inflation, a sluggish economy, and a budget deficit. Chancellor Reeves faces the dual task of boosting GDP growth without exacerbating inflation while also addressing public finances.

  • Cost of Living: While government plans aim to cut the cost of living, external factors and domestic policies are continuously shaping household and business spending decisions.

  • Investment Climate: Global economic uncertainty, potentially influenced by international political developments, is cited as a factor that could "chill" world economy and business investment.

  • Fiscal Rules and Spending: The government's commitment to self-imposed fiscal rules, potentially requiring spending cuts, is under pressure amidst demands for increased funding for public services. Reversals on planned spending cuts have contributed to a rise in public debt.

Conclusion: Navigating Economic Headwinds

The United Kingdom's economy is at a critical juncture, exhibiting a 0.1% GDP growth rate for the final quarter of 2025, a figure that underscores persistent challenges. While the Labour government, under Chancellor Rachel Reeves, maintains its commitment to an economic plan focused on growth and stability, the subdued performance has drawn considerable criticism. Signs of potential improvement in early 2026 are emerging, supported by some economic indicators and projections for interest rate adjustments by the Bank of England. However, underlying pressures, including inflation, business cost concerns, and fiscal management, continue to weigh on the outlook. The effectiveness of the government's strategies in stimulating sustained, robust growth remains a central point of contention as the nation approaches further fiscal updates.

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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% in the last three months of 2025. This is the same as the three months before.
Q: How much did the economy grow in the whole of 2025?
The economy grew by 1.3% in 2025. This is a little more than the 1.1% growth in 2024.
Q: Why is the economy growing so slowly?
Some reasons include slow growth in the services sector and problems in manufacturing, like car production. People are also looking at government plans and how they affect business.
Q: What do people think about the slow growth?
Some people think the government is not doing enough to help the economy grow. Others think the government has a good plan for the future.
Q: Are there any signs of the economy getting better?
Some experts see small signs that the economy might start to grow a bit faster in early 2026. The Bank of England might also lower interest rates soon.