Britain’s economy barely expanded in the final quarter of 2025, with growth coming in weaker than previously estimated in the lead-up to Chancellor Rachel Reeves’ budget, according to official data released on Thursday.
The Office for National Statistics (ONS) said gross domestic product rose by just 0.1% between October and December, matching the sluggish pace recorded in the third quarter. Economists polled by Reuters, along with the Bank of England, had expected growth of 0.2% over the period.
The quarter was overshadowed by intense speculation over potential tax rises ahead of Reeves’ budget on November 26. The ONS also revised monthly GDP figures for the three months to November, now showing a 0.1% contraction rather than the previously reported 0.1% expansion.
Signs of improving sentiment
More recent indicators have pointed to a modest improvement in confidence among households and businesses.
Luke Bartholomew, deputy chief economist at Aberdeen, said survey data suggested sentiment may have begun to recover after the budget. “There were some tentative signs that confidence turned a corner and started to improve late last year, which could help support stronger activity in 2026,” he said, though he cautioned that renewed political uncertainty could reverse that momentum.
Prime Minister Keir Starmer has faced mounting political pressure this week amid fallout linked to the Jeffrey Epstein scandal, adding to the uncertainty clouding the outlook.
Thursday’s figures reinforced investor expectations that the Bank of England could move to cut interest rates again in March. The revised monthly GDP data showed a marked downgrade to growth, highlighting the fragility of the recovery.
Business investment fell by nearly 3% in the fourth quarter — the steepest quarterly decline since early 2021 — largely driven by volatile transport-related spending.
Thomas Pugh, economist at consultancy RSM, said the broad-based weakness in investment indicated that uncertainty surrounding the budget had weighed on corporate spending decisions.
