The UK economy is anticipated to have recorded modest growth in the final quarter of 2025, despite ongoing concerns surrounding the autumn Budget. Economists broadly predict a 0.1% expansion in gross domestic product (GDP) for the period from October to December, with official data set to be released by the Office for National Statistics (ONS) on Thursday, February 12.
Quarterly Performance and Key Drivers
This projected growth follows a mixed economic performance in previous months. In the third quarter of 2025, the economy grew by 0.1%, but this was followed by a 0.1% decline in October. A rebound occurred in November, with a 0.3% increase, largely driven by the manufacturing sector's recovery, particularly at Jaguar Land Rover after a significant cyberattack.
However, December is estimated to have seen no growth, according to Pantheon Macroeconomics. Weak indicators, such as the construction industry PMI data, which showed deep declines across housing, commercial construction, and civil engineering, contributed to this stagnation.
Impact of Budget Uncertainty
The autumn Budget created a cloud of uncertainty that hampered economic activity throughout the fourth quarter. Victoria Scholar, head of investment at Interactive Investor, noted that once this uncertainty began to fade in December, economic activity likely picked up. She suggested that the services sector may have improved, with consumers increasing spending on food, beverages, retail, and hotels during the festive season.
Robert Wood, chief UK economist at Pantheon Macroeconomics, indicated that GDP growth "could tip to 0.2%" due to these factors, but he maintained his prediction of 0.1%. He added, "We think the broad thrust from activity in the services sub-sectors in December indicates that Budget uncertainty is already fading quickly."
Broader Economic Outlook
Despite the modest growth in Q4 2025, the broader picture for the UK economy remains muted. The Bank of England recently revised its estimates, stating that the economy grew by 1.4% in 2025, down from a previous forecast of 1.5%. Furthermore, the Bank cut its growth forecast for 2026 from 1.2% to 0.9% and for 2027 from 1.6% to 1.5%, reflecting ongoing challenges and a cautious outlook.
Overall, while the UK economy shows resilience with slight growth, persistent issues such as Budget concerns and sectoral weaknesses continue to temper expectations for more robust expansion in the near future.
