UK Economy Grows Very Slowly at End of 2025

The UK economy grew by a small amount, just 0.1%, in the last part of 2025. This is slower than some people thought it would be. Different parts of the economy did not grow the same way, with some doing better than others.
By Newsroom | Economy, United Kingdom |

The United Kingdom's economy experienced a period of notably slow growth at the close of 2025, with the Gross Domestic Product (GDP) expanding by a mere 0.1% in the final three months of the year. This figure, released by the Office for National Statistics (ONS), falls short of earlier predictions and signals a continuation of a subdued economic trend, raising concerns about the nation's economic vitality. The performance marks a significant point of focus for the current government, which has pledged to make economic growth a central priority.

Official Figures Reveal Stagnation

The latest official figures from the ONS show that the UK economy grew by 0.1% in the fourth quarter of 2025. This rate of growth was consistent with the previous quarter, indicating a lack of significant upward momentum.

  • Quarterly Growth: The economy expanded by 0.1% in the period from October to December 2025.

  • Monthly Performance: In December alone, economic activity increased by 0.1%. This followed a modest 0.2% growth in November, a figure that was later revised downwards from an initial estimate of 0.3%.

  • Economist Expectations: The reported 0.1% quarterly growth was less than the 0.2% that many economists had anticipated, adding to concerns about the economy's performance.

Sectoral Performance: A Mixed Picture

While overall growth was sluggish, different sectors of the economy showed varied performances.

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  • Services Sector: This often dominant sector showed no growth in the final quarter. This lack of expansion in services was a key factor in the overall low GDP figure.

  • Manufacturing: In contrast to services, manufacturing emerged as a key driver of the economy, providing the primary boost to growth.

  • Construction: The construction industry experienced a significant downturn, registering its worst performance in over four years. This decline in construction activity contributed to the overall weakness.

  • Industrial Production: Activity within industrial production also saw a decrease.

The data indicates a divergence in sectoral performance, with manufacturing acting as a sole bright spot against stagnation in services and declines in construction and industrial production.

Business Conditions and Policy Impact

Concerns about the economic climate were echoed by business representatives, with small businesses reporting pressures comparable to or worse than those experienced during the COVID-19 pandemic.

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  • Small Business Pressures: The Business and Trade Committee highlighted the severe operational challenges faced by small businesses.

  • Government Policy Scrutiny: The economic figures emerge at a time when the government's fiscal plans, including increased National Insurance contributions and a higher national minimum wage, are facing criticism. Critics argue these policies could negatively impact investment, employment, and overall growth.

  • Speculation's Effect: Some analysis suggests that prolonged speculation surrounding the late November Budget may have dampened economic activity in the period leading up to the GDP data release.

The economic environment appears to be challenging for businesses, particularly smaller enterprises, and policy decisions are under scrutiny for their potential to hinder growth.

Expert Observations on the Economic Landscape

Analysts have provided insights into the current state and outlook of the UK economy.

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"Looking ahead, we’re more positive on the UK’s growth outlook, with the Autumn budget proving less of a headwind to near-term economic activity than we’d originally anticipated. Consumer spending showed more promising signs and has bounced back as real wage growth has fed through into higher retail and online spending." - Sandra Horsfield, Investec Economics

Liz McKeown, Director of Economic Statistics at the ONS, described the latest data as showing a "mixed economic picture." She also noted that the rate of economic growth across 2025 as a whole was "up slightly on the previous year, with growth seen in all main sectors."

This highlights a contrast between short-term weakness and a slightly improved annual growth rate, with expert opinions offering a cautiously optimistic view for the near future.

Broader Economic Context and Future Outlook

The 0.1% growth figure at the end of 2025 has been described as "sluggish" and indicates the economy is "stuck in a rut." This performance will likely intensify scrutiny on the government's ability to stimulate the economy, especially given their election promises.

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  • Annual Growth: While the quarterly figures are weak, the overall economic growth for 2025 was reported as slightly higher than in the preceding year, with growth observed across all major sectors.

  • Investment and Trade: Potential impacts from international trade relations, such as threats of tariffs from the U.S. on European Union and UK goods, were also noted. A more balanced trade relationship with the US might offer some protection, but disruptions could lead to short-term price increases.

  • Monetary Policy: Some economists predict that the central bank may consider cutting interest rates in April to invigorate the economy.

The data points to a prolonged period of subdued growth, with the annual figures showing only marginal improvement. The economic outlook is influenced by domestic policy, international trade dynamics, and potential central bank actions.

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Conclusion and Next Steps

The UK economy concluded 2025 with a growth rate of just 0.1% in the fourth quarter, a figure that fell below expectations and underscored a period of economic stagnation. While manufacturing provided some support, weakness in the services sector and a significant decline in construction contributed to the overall sluggishness. Small businesses are reporting considerable operational pressures.

The economic performance poses a challenge for the current government, whose key pledge is to prioritize economic growth. Future economic activity will likely be influenced by:

  • Policy Adjustments: The effectiveness of current fiscal policies and any potential adjustments made in response to the economic data.

  • Sectoral Recovery: The ability of the services and construction sectors to rebound.

  • Consumer Spending: The sustainability of consumer spending, which has shown some positive signs due to real wage growth.

  • Monetary Policy Decisions: Potential interest rate changes by the central bank.

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Further official data releases will be crucial in determining whether the UK economy can shift from its current slow trajectory towards more robust growth.

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 of growth.
Q: Was this growth what people expected?
No, many people thought the economy would grow a bit more. The actual growth was less than expected.
Q: Did all parts of the economy grow the same?
No, the growth was mixed. Manufacturing helped the economy grow, but services did not grow at all. Construction did worse.
Q: Are businesses finding things difficult?
Yes, especially small businesses. They are facing many problems, similar to during the COVID-19 pandemic.