Britain’s economy eked out a meagre 0.1% growth in the final quarter of 2025, hampered by a sharp downturn in construction, according to fresh data from the Office for National Statistics (ONS).
The sluggish performance comes as the Bank of England downgraded its outlook for 2026, painting a picture of an economy struggling to gain traction amid persistent headwinds.
The ONS reported that real gross domestic product (GDP) rose by just 0.1% between October and December 2025, matching the tepid expansion seen in the previous quarter.
For the full year, GDP grew by 1.3% – an improvement on 2024’s 1.1% but still below the Bank’s earlier expectations of 1.4%. On an annual basis, the economy expanded by 1.0% compared to the same period in 2024, with per-head GDP dipping 0.1% for the second straight quarter, underscoring the uneven recovery.
Sector breakdowns
Sector breakdowns revealed stark contrasts. The production sector provided a bright spot, surging 1.2% thanks to gains in manufacturing (0.9%) and electricity, gas, steam, and air conditioning supply (3.1%).
Services, which dominate the UK economy, stalled at 0% growth, with consumer-facing activities edging up 0.2% but offset by a 1.1% drop in professional, scientific, and technical services.
Construction, however, took a nosedive, plummeting 2.1% as new work fell 2.6% and repair and maintenance dropped 1.5%, with private housing particularly hard-hit at -3.6%.
The figures align with a broader narrative of “subdued growth,” as described by Liz McKeown, ONS director of economic statistics. Economists echoed the sentiment, with Ruth Gregory of Capital Economics calling the 1.3% annual growth “disappointing” and indicative of an economy with “very little momentum.”
Bank of England slashes forecasts
Compounding the gloom, last week the Bank of England slashed its 2026 growth forecast to 0.9% from 1.2%, while raising its unemployment projection to 5.3% from 5%. This cautious stance has tempered hopes for imminent interest rate cuts.
Nominal GDP, which includes inflation effects, rose 0.6% in the quarter, with the implied deflator, a measure of domestic price pressures, climbing 3.2%.
While the data incorporates no major revisions to prior quarters’ overall GDP path, tweaks to underlying components reflect updated business surveys and seasonal adjustments.
As Chancellor Rachel Reeves prepares her spring budget, these numbers highlight the challenges facing Prime Minister Keir Starmer’s government in delivering on promises of economic revival.
With construction in freefall and services flatlining, analysts warn that without targeted stimulus, Britain’s limp along could extend well into the new year.
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