UK Economy Expected to Show Modest Growth in Final Quarter of 2025
The UK economy is anticipated to have recorded modest growth during the final three months of 2025, despite ongoing pressures from budget uncertainty. Economists broadly predict that gross domestic product (GDP) expanded by 0.1% in the quarter, with official data set to be released by the Office for National Statistics (ONS) on Thursday.
Quarterly Performance and Key Indicators
This follows previous ONS figures which showed the economy grew by 0.1% in the three months to September 2025. However, October saw a slight decline of 0.1%, before a rebound of 0.3% in November, partly driven by recovering production at Jaguar Land Rover after a major cyberattack.
December is forecast to have experienced no growth, according to estimates from Pantheon Macroeconomics. Weak data for the month was indicated by several industry surveys, including the construction industry PMI, which revealed continued deep declines across housing, commercial construction, and civil engineering sectors.
Impact of Budget Clarity and Festive Spending
Nevertheless, some analysts suggest that improved certainty following the autumn Budget may have supported businesses in the run-up to Christmas, potentially driving a slight increase in spending. Victoria Scholar, head of investment at Interactive Investor, commented: "It is likely that economic activity picked up after the budget once that cloud of uncertainty shifted to the rear view mirror in December."
She added: "Plus, there could have been an improvement in the services sector with consumers spending on things like food and beverages, retail, and hotels around the festive season." This aligns with key indicators pointing towards an enhancement in the vital services sector as consumer spending rises.
Expert Predictions and Broader Economic Outlook
Robert Wood, chief UK economist at Pantheon Macroeconomics, noted that GDP growth "could tip to 0.2%" due to these factors, but he maintained his prediction of 0.1%. He stated: "We think the broad thrust from activity in the services sub-sectors in December indicates that budget uncertainty is already fading quickly."
Despite this modest quarterly growth, the broader picture for UK economic expansion remains muted. The Bank of England recently revised its estimates, indicating that the economy grew by 1.4% in 2025, down from a previous forecast of 1.5%. Furthermore, the Bank has cut its growth projections for 2026 from 1.2% to 0.9%, and for 2027 from 1.6% to 1.5%.
As the ONS prepares to unveil the latest GDP data, economists will be closely monitoring whether the anticipated 0.1% growth materialises, and how budget-related uncertainties continue to influence the UK's economic trajectory in the coming months.
