Britain’s economy stuttered to a near-halt at the end of 2025 as budget uncertainty and a lacklustre performance in December saw it record meagre growth in the final three months.
Official figures showed gross domestic product (GDP) rose by 0.1% in the fourth quarter, following growth of 0.1% in the previous three months.
The Office for National Statistics (ONS) estimated the economy expanded by 0.1% in December, dashing hopes of a year-end rebound.
The fourth quarter figures meant the economy grew by 1.3% overall in 2025, up from 1.1% in 2024 and the highest growth since 2022, but lower than the 1.4% expected by the Bank of England and most economists.
Chancellor Rachel Reeves admitted there was “more to do” to bolster the economy.
She told reporters after the GDP figures were released: “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.”
She added: “Is there more to do? Absolutely, but we’ve created the conditions of growth, and I’m confident that this will be the year that we see the results of that.”
It comes after Health Secretary Wes Streeting revealed past messages to Lord Mandelson which showed him claiming Ms Reeves and the Prime Minister had “no growth strategy at all”.
Ms Reeves insisted Ms Streeting was “wrong”.
She said: “He was really clear yesterday that one of the things he got wrong in his messages was that the economy has grown this year.
“We have had six cuts in interest rates, and as Wes said yesterday, that is down to my economic plan, this Government’s economic plan.”
The GDP data follows a volatile end to 2025 for the British economy, with output declining by 0.1% in October and then rebounding by a downwardly revised 0.2% in November as the manufacturing sector was boosted by recovering production at Jaguar Land Rover after its major cyber attack.
Budget uncertainty added to pressure in the quarter, with the long lead-up widely seen holding back growth ahead of the November 26 fiscal event.
Liz McKeown, ONS director of economic statistics, told the BBC the overall picture continued to be one of “subdued growth”.
The figures showed the UK’s dominant services sector flatlined in the fourth quarter with zero growth, while production expanded by 1.2% and construction fell by 2.1%, marking the sector’s worst growth for more than four years.
Scott Gardner, investment strategist at JP Morgan Personal Investing, said the UK economy “ended 2025 firmly in the slow lane, undershooting expectations and remaining in a low gear in the final quarter of the year as businesses and consumers digested the Chancellor’s November budget”.
“This marks a clear reversal in fortunes for the economy after strong growth shown in the first half of the year failed to carry over into the rest of 2025,” he added.
There was also a steep fall in business investment during the closing months of 2025, down 2.7% in the fourth quarter, which was the biggest decline for four years.
Shadow chancellor Sir Mel Stride said: “These disappointing statistics show a Downing Street and a Treasury that have taken their eye off the ball.”
He said they are “distracted by scandals of their own making as Sir Keir Starmer’s authority crumbles”.
Ms Reeves pointed to data showing an improvement in GDP per head, which grew by 1% in 2025 following no growth in 2024, though the data also showed it had fallen for two quarters in a row at the end of last year.
Experts said more recent economic indicators had shown signs of an improvement at the start of 2026, but the broader outlook for UK growth is still muted, reinforcing expectations for an interest rate cut next month.
The Bank of England last week downgraded growth forecasts for the next two years, from 1.2% to 0.9% for 2026, and from 1.6% to 1.5% for 2027.
Rob Wood, at Pantheon Macroeconomics, said he expects growth to pick up to 0.4% in the first three months of 2026, though he believes this will not stop policymakers cutting rates next month to 3.5%.
