The UK economy failed to hit its growth forecast in 2025, after a worse-than-expected end to the year.
Official figures from the Office for National Statistics showed the country grew by 1.3% over the course of 2025, below the 1.5% forecast by the Office for Budget Responsibility. It was also lower than the 1.4% growth that had been forecast by the International Monetary Fund.
The lower-than-expected figure follows lacklustre growth of 0.1% in the fourth quarter. While December saw a slight uplift of 0.1%, the ONS said November’s growth has been revised down to 0.2% from the 0.3% first reported, while October had an unrevised fall of 0.1%.
Services output showed no growth in the three months to December, following on from no growth in the three months to November, while construction output fell by 2.1%, following a fall of 0.9% in the three months to November. Production output grew by 1.2% over the three month period, following a fall of 0.1% in the three months to November.
Lindsay James, investment strategist at Quilter, said: “It is clear the economy is very fragile. The Christmas period was weak by historical standards, and that is laid bare in today’s data. The services sector, which had previously been noted as the largest contributor, showed no growth and its impact was revised down from 0.2% to nothing in the three months to November too.
“While the picture is rather bleak at the moment, some optimism is warranted if inflation falls. We should now be reaching a place where peak uncertainty is behind us, and businesses are better able to plan for the post budget and post trade deal world.
“However, the well flagged leadership challenge – which headlines would have us believe is fast becoming a case of when rather than if – risks derailing that. Should that materialise and we see a lurch to the left, it could result in higher spending, higher taxes and even weaker growth. Only time will tell how it plays out.”
Chris Beauchamp, chief market analyst at IG, said: “At least all the main sectors of the economy grew last year, but this is very thin gruel. This should increase the pressure on the Prime Minister and the Chancellor to come up with a growth plan, assuming they can find time away from the endless scandals engulfing the Government.”
Adam Hoyes, senior asset allocation analyst at Rathbones, echoed the sombre tone.
“Today’s preliminary GDP data show the UK economy wrapping up 2025 on a lacklustre note. The meagre increase reemphasises the need for the Government to prioritise growth and investment after the missed opportunity of the Autumn Budget.
“Despite expectations for a slight acceleration in growth over the fourth quarter, today’s figures paint a picture of an economy on tick over.”
Hoyes added: “The Bank of England made it clear last week that we should expect further interest rate cuts over the course of 2026. Today’s data suggests that is a sensible assumption, and at the margin, may convince some of the more hawkish members of the Monetary Policy Committee to put a bit more weight on the downside risks to activity and consider backing rate reductions. Though it’s unlikely to move the dial substantially, and near-term market expectations for Bank Rate are little changed so far today.
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