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The UK economy undershot expectations to grow by 0.1 per cent in the final quarter of 2025, capping a year of lacklustre growth that was overshadowed by trade shocks and uncertainty over fiscal policy.
The change in real quarterly GDP fell short of the 0.2 per cent increase forecast in a Reuters poll of analysts, and compared with an expansion of 0.1 per cent in the third quarter.
GDP increased 0.1 per cent in the month of December alone. The previous month’s increase was revised down slightly to 0.2 per cent.
Chancellor Rachel Reeves is banking on boosting weak growth as she attempts to revive Labour’s flagging opinion poll ratings and deliver on pledges to improve living standards.
In November’s Budget, she doubled her fiscal headroom in a bid to foster stability and pave the way for increased business investment.
But the latest official data underscores the uphill task Prime Minister Sir Keir Starmer’s government faces in re-energising the UK economy. Real GDP per head fell for the second consecutive quarter by 0.1 per cent, the ONS reported.
“The UK economy continues to stagnate,” said Tomasz Wieladek, chief European macro strategist at asset manager T Rowe Price. “These data reinforce the narrative that the economy is weakening faster than the MPC expects.”
Luke Bartholomew, deputy chief economist at Aberdeen, added: “It is still hard to see what will drive a sustained increase in the underlying rate of growth this year.”
This means “the Bank of England is set to continue to lower interest rates to try to support growth, and we expect the next cut at the March meeting”, he said.
For the year as a whole, UK GDP increased by 1.3 per cent, compared with 1.1 per cent in the previous year.
Growth in the latest quarter was propelled by higher industrial production, which rose 1.2 per cent, but this was countered by a 2.1 per cent fall in construction output, while services showed no growth, according to the ONS.
Responding to the figures on Thursday, Reeves said: “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.”
The pound was little changed following the data release, flat against the dollar at $1.363.