Britain’s economy barely grew in the final quarter of 2025 as activity fared worse than initially estimated during the run-up to finance minister Rachel Reeves’ budget.
Gross domestic product grew by 0.1 per cent in the October-to-December period, the same slow pace as in the third quarter, the Office for National Statistics said on Thursday.
Economists polled by Reuters, as well as the Bank of England, had forecast 0.2 per cent fourth-quarter growth compared with the previous three months.
The period was marked by rampant speculation about tax increases before Reeves’ budget on November 26.
The ONS revised down monthly GDP data for the three months to November to show a 0.1 per cent contraction rather than 0.1 per cent growth.
Some more recent data has suggested that uncertainty has lifted for consumers and businesses.
“Looking at various surveys, there were some tentative signs that sentiment turned a corner and started to improve after the budget last year, which could help deliver a pick-up in activity this year,” Luke Bartholomew, deputy chief economist at Aberdeen, said.
“However, recent political uncertainty may see that sentiment bounce reverse.”
Prime Minister Keir Starmer has had to fight to keep his grip on Downing Street this week due to fallout from the Jeffrey Epstein scandal.
Thursday’s figures underscored why investors think that the Bank of England is more likely than not to cut interest rates again in March.
The monthly GDP data showed a sharp downward revision to growth.
The data suggested hesitancy on the part of businesses during the fourth quarter as their investment fell by almost three per cent – the biggest quarter-on-quarter drop since early 2021, driven largely by volatile transport investment.
Manufacturing was the biggest driver of the increase in output, despite the fact that car output was still recovering from September’s cyberattack on Jaguar Land Rover, while the dominant services sector was flat.
Construction output contracted by 2.1 per cent.
In 2025 as a whole, Britain’s economy grew by an annual average 1.3 per cent, the Office for National Statistics said, compared with 0.9 per cent in France, 0.7 per cent in Italy and 0.4 per cent in Germany.
British economic growth per head contracted by 0.1 per cent for a second quarter, although it rose by 1.0 per cent for 2025 as a whole.
In December alone, the economy grew by 0.1 per cent, the ONS said, as expected in the Reuters poll.
That left the size of the economy back at its level of June 2025.
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