The UK economy ended 2025 on a “lacklustre” note, prompting Chancellor Rachel Reeves to admit there is “more to do” to kickstart Labour’s growth mission. New data from the Office for National Statistics (ONS) reveals that the British economy grew by a mere 0.1% in the final quarter of 2025 (October to December), missing economist forecasts of 0.2%.
Key Figures from the ONS February 2026 Report
While the quarterly growth was sluggish, the full-year performance for 2025 offered a mixed bag of results for the Treasury.
- Quarterly GDP: 0.1% (Q4 2025), unchanged from Q3.
- Annual GDP Growth (2025): 1.3%, slightly higher than the 1.1% seen in 2024 but below the Office for Budget Responsibility (OBR) forecast of 1.5%.
- Monthly December GDP: 0.1%, a slowdown from the revised 0.2% in November.
- GDP Per Capita: Increased by 1.0% annually, though it shrank in the final two quarters of the year.
Sector Breakdown: Services Stagnate While Production Rises
The ONS highlighted a “subdued” picture across the core pillars of the UK economy. The dominant services sector, which accounts for roughly 80% of UK output, saw zero growth in the final three months of the year.
The slight positive movement in GDP was instead propped up by the production sector, which expanded by 1.2%, largely driven by a rebound in automotive manufacturing. Conversely, the construction industry shrank by 2.1%, marking its worst quarterly performance in four years.
Political Reaction: ‘Securonomics’ Under Fire
Chancellor Rachel Reeves defended the government’s trajectory, noting that the UK remained the fastest-growing European G7 economy in 2025.
“We can’t turn things around overnight, but we have created the conditions now for the economy to grow and it is doing just that,” Reeves stated. “I am confident that the decisions we’ve made to return stability and reform planning will deliver stronger growth in 2026.”
However, Shadow Chancellor Jeremy Hunt argued that Labour’s Autumn Budget had “weakened the economy,” citing a 3% drop in business investment during Q4 as evidence that tax rises have deterred private sector activity.
2026 Economic Outlook: Reasons for Optimism?
Despite the slow end to the year, many economists expect a “Spring bounce.” Early surveys for January 2026 suggest that business and consumer sentiment have picked up following the removal of Budget uncertainty. The Bank of England, which held interest rates at 3.75% earlier this month, is widely expected to consider a rate cut in March to further stimulate the “slow lane” economy.
