UK Economy Grows Very Slowly

The UK's economy grew by just 0.1% in the last three months of 2025. This is very slow growth. Some parts of the economy are doing worse than others.
By Newsroom | Economy, United Kingdom |

The United Kingdom's economy registered a modest growth of 0.1% in the three months leading up to December 2025, a pace that has drawn scrutiny and concern. This figure, indicating a near-stagnant economic environment, has intensified discussions about the effectiveness of current fiscal policies and the government's strategy for fostering sustained growth.

Reeves says 'more to do' after sluggish GDP growth - 1

Economic Landscape: A Period of Slowing Momentum

The economic performance in the latter part of 2025 and early 2026 has been characterized by sluggish growth, raising questions about the trajectory of the UK's financial health. The official figures reveal a complex picture, with some sectors showing resilience while others experience contraction.

Reeves says 'more to do' after sluggish GDP growth - 2

  • GDP Performance: The Gross Domestic Product (GDP) grew by 0.1% in the three months ending December 2025, mirroring the growth rate of the preceding three months. This sustained, low growth rate has been described as akin to "treading water" economically.

  • Annual Growth: For the entirety of 2025, the UK economy saw a slight acceleration in growth to 1.3%, an improvement from 1.1% in 2024. However, this acceleration was largely driven by a brief surge at the start of 2025, with the latter half of the year showing a marked slowdown.

  • Sectoral Performance: Reports indicate that specific sectors have struggled. Construction, for instance, experienced its worst performance in over four years. The services sector showed no growth in the fourth quarter of 2025.

Policy Responses and Public Reaction

Chancellor Rachel Reeves has acknowledged the need for further action, stating there is "more to do to build an economy that works for working people." Her response to the latest figures suggests an awareness of the challenges, yet the government faces criticism for its economic management.

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  • Government Stance: The government maintains it has the "right economic plan to build a stronger and more secure economy," aiming to lower the cost of living, reduce national debt, and create conditions for growth and investment.

  • Criticism: Critics have accused the government of "taking its eye off the ball" and suggested that economic activity was impacted by speculation leading up to the late November Budget. Some have even posited that certain government actions appear intended to slow the economy.

  • Budgetary Measures: The Chancellor's Budgets have included a mix of tax increases and public investments, alongside measures like reducing energy bills and extending fuel duty cuts. There have been suggestions that a "tax-heavy" approach was adopted to manage inflation and public finances.

Contributing Factors and Expert Views

The economic performance is being analyzed against a backdrop of global economic shifts and domestic policy decisions.

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  • Global Influences: External factors, such as increasing interventionism in global affairs, are cited as potential dampeners on global economic activity and business investment.

  • Domestic Pressures: Internal pressures include a rising minimum wage, past tax increases, elevated borrowing costs, and persistent high cost pressures for businesses.

  • Expert Outlook: Some economists express cautious optimism, pointing to stronger data for January 2026 on areas like productivity as potential signs of an upturn. Others remain skeptical, finding it "hard to see what will drive a sustained increase in the underlying rate of growth this year."

Economic Indicators and Market Performance

Despite the reported economic slowdown, certain market indicators have shown positive movement.

  • Interest Rates: There is an expectation that the Bank of England may cut interest rates in the coming months, with some anticipating a cut at the March meeting.

  • Stock Market: The London stock market has reached new record highs, a development occurring concurrently with the reports of weak GDP growth.

Future Outlook and Challenges

The data comes ahead of the spring statement on March 3, 2026, where the Chancellor is expected to provide an update on the economy. However, expectations are that no significant changes to tax policy will be announced at that time. The government faces the complex task of stimulating GDP growth without exacerbating inflation, while also managing public finances. The spectre of recession has been raised by some observers, particularly with projections suggesting growth may slow further in 2026.

Sources Used:

  • [Article 1] The Standard: "Rachel Reeves slammed for 'taking eye off ball' as UK economy grows by just 0.1%"

  • Context: Reports on the UK's GDP figures and the political reaction to the Labour government's economic performance.

  • Link: https://www.standard.co.uk/business/sluggish-uk-economy-disappoints-city-b1270690.html

  • [Article 2] BBC News: "UK economic growth slows to 0.1% in final figures before Budget"

  • Context: Details the UK's slow GDP growth and its implications for Chancellor Rachel Reeves ahead of a key budget.

  • Link: https://www.bbc.com/news/live/c87427qpzrpt

  • [Article 3] The Guardian: "Chancellor Rachel Reeves predicts ‘stronger growth this year’ after UK economy ends 2025 ‘in the slow lane’"

  • Context: Discusses the UK's weak GDP figures for the fourth quarter of 2025 and the Chancellor's outlook.

  • Link: https://www.theguardian.com/business/live/2026/feb/12/uk-gdp-report-economy-december-q4-2025-growth-rachel-reeves-budget-news-updates

  • [Article 4] The Express: "Reeves slammed as GDP growth is 'economic version of treading water'"

  • Context: Reports on criticism leveled against Chancellor Rachel Reeves regarding the UK's slow GDP growth.

  • Link: https://www.express.co.uk/finance/personalfinance/2158341/reeves-slammed-gdp-growth-economic

  • [Article 5] The Guardian: "Growth figures give boost to Reeves – but it’s too early to get carried away"

  • Context: Analyzes economic growth figures and their impact on Chancellor Rachel Reeves, touching on pre-budget speculation.

  • Link: https://www.theguardian.com/politics/2026/jan/15/growth-figures-boost-rachel-reeves-analysis

  • [Article 6] Daily Business: "Sluggish growth prompts calls for more action"

  • Context: Covers the UK's sluggish economic growth and the resulting demands for government action, including comments on potential interest rate cuts.

  • Link: https://dailybusinessgroup.co.uk/2026/02/sluggish-growth-prompts-calls-for-more-action/

  • [Article 7] BBC News: "UK GDP: Rachel Reeves disappointed after economy shrinks"

  • Context: Reports on the UK economy shrinking and the pressure this places on the government's growth priorities.

  • Link: https://www.bbc.com/news/articles/cq6mvem8neno

  • [Article 8] The Guardian: "Economic bounceback may be under way but Reeves cannot afford to relax"

  • Context: Examines the signs of an economic bounceback and the challenges remaining for Chancellor Rachel Reeves.

  • Link: https://www.theguardian.com/business/2025/aug/14/economic-bounceback-may-be-under-way-but-reeves-cannot-afford-to-relax

  • [Article 9] International Finance: "IF Insights: Amid slowing growth trajectory, Rachel Reeves presents another tax-heavy budget"

  • Context: Analyzes Chancellor Rachel Reeves's budget in the context of a slowing economy, focusing on tax measures and inflation management.

  • Link: https://internationalfinance.com/finance/if-insights-amid-slowing-growth-trajectory-rachel-reeves-presents-another-tax-heavy-budget/

  • [Article 10] The Guardian: "Shrinking economy offers unhelpful backdrop for Rachel Reeves’s growth push"

  • Context: Discusses the shrinking UK economy and its implications for Chancellor Rachel Reeves's fiscal plans and growth strategies.

  • Link: https://www.theguardian.com/business/2025/mar/14/gdp-shrinking-economy-rachel-reeves-growth-plans-analysis

  • [Article 13] The Independent: "Reeves’ actions would suggest she is trying to slow economy down, says ex-bank chief"

  • Context: Presents an opinion from a former bank chief suggesting Chancellor Reeves's actions might be intentionally slowing the economy. (Note: Summary was very brief and did not allow for deep extraction of facts).

  • Link: https://www.independent.co.uk/news/uk/politics/reeves-budget-starmer-economy-natwest-b2864447.html

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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 three months ending in December 2025. This is a very small amount.
Q: How did different parts of the economy do?
Some areas like construction did very poorly. The services part of the economy did not grow at all in the last three months of 2025.
Q: What does the government say about this?
The government says it has a plan for a stronger economy. They want to lower the cost of living and reduce debt.
Q: What do other people think?
Some people are unhappy with the government's plan. They think the government might be trying to slow down the economy on purpose.