The United Kingdom’s economy eked out a modest 0.1 percent growth in the fourth quarter of 2025, according to preliminary data from the Office for National Statistics (ONS) released Thursday. The result fell short of economists’ expectations, who had forecast a 0.2 percent expansion for the October–December period, following similarly sluggish growth of 0.1 percent in the third quarter.
On a month-on-month basis, the economy expanded 0.1% in December, down from a revised 0.2 percent in November, highlighting a period of stagnation that has left policymakers and investors cautiously optimistic but concerned. Following the data release, the pound remained flat against the dollar at US$1.3624, reflecting market acknowledgement of the modest economic momentum.
ONS Director of Economic Statistics Liz McKeown described the data as illustrating a mixed economic landscape. “The often-dominant services sector showed no growth, with the main driver instead coming from manufacturing. Construction, meanwhile, registered its worst performance in more than four years,” she said.
The UK economy as a whole is estimated to have grown 1.3 percent in 2025, up slightly from 1.1 percent in 2024, suggesting a very gradual recovery following years of turbulence caused by the pandemic, Brexit-related disruptions, and fluctuating global conditions. Despite this slight improvement, growth remains below pre-pandemic levels, and concerns linger over a slowing labor market and persistent inflationary pressures.
The Bank of England, in its early February monetary policy meeting, opted to keep interest rates on hold at 3.75%, citing ongoing inflation concerns. Economists now anticipate that the central bank may cut rates in April to stimulate the subdued economy, assuming inflationary pressures ease as expected. Lower borrowing costs could provide a lifeline for households and businesses, particularly in sectors struggling under high energy and input costs.
More Read
Market participants noted that while the growth figure is modest, it signals that the economy has not entered contraction territory. Samuel Edwards, head of Client Portfolio Management at Ebury, said the result offered a “slither of positive economic news” amid a turbulent political and financial period in the UK. “After a very turbulent week in UK politics and a wave of market jitters, businesses will be pleased to have some positive momentum, albeit minimal,” he added.
Investment strategist Scott Gardner of J.P. Morgan Personal Investing highlighted that the mixed data could nonetheless point toward a tentative recovery in 2026. “Manufacturing activity picked up in the first month of the year while the services industry has seen a decent influx of new business activity,” Gardner said. “The hope is that this progress can grease the wheels of the economy and lead to an improved outlook and performance over 2026.”
Despite these cautious signs, structural challenges remain. The services sector, which accounts for more than three-quarters of UK GDP, showed no growth in the final quarter, reflecting subdued consumer spending and constrained business investment. Meanwhile, construction activity posted its weakest quarterly performance in over four years, indicating that the housing and infrastructure markets are still struggling with labor shortages, supply-chain issues, and elevated costs.
More Read
The ONS report underscores that the UK economy’s growth story is increasingly uneven, with pockets of strength in manufacturing offset by weakness in services and construction. Policymakers face the challenge of stimulating growth without exacerbating inflation, while businesses must navigate a climate of high costs, cautious consumer spending, and lingering uncertainty around labor market dynamics.
As the UK heads into 2026, the key question for economists, investors, and policymakers is whether modest growth in the closing months of 2025 can translate into a more sustainable and broad-based recovery, or if the economy will continue to tread water under persistent headwinds. For now, the 0.1% expansion serves as a reminder that the path to robust growth remains gradual and uncertain.
