The UK economy is poised to reveal a period of modest expansion during the final quarter of 2025, as it gradually moves beyond persistent budget uncertainties, according to leading economic analysts. The Office for National Statistics (ONS) is scheduled to release critical Gross Domestic Product (GDP) figures for December and the entire fourth quarter this Thursday, providing a more definitive snapshot of the nation's economic health and trajectory.
Economists Predict Slight Growth Amidst Improving Conditions
Most economists are forecasting a 0.1 per cent growth for the quarter, reflecting a cautious but positive trend. However, some analysts suggest this figure could edge slightly higher, potentially reaching 0.2 per cent, driven by stronger-than-anticipated economic activity in November and a noticeable increase in clarity following the autumn Budget. This improved certainty is believed to have bolstered business confidence and consumer spending in the crucial run-up to the festive season, offering a much-needed lift to the economy.
Recent Economic Performance and Sectoral Insights
This latest data follows earlier ONS reports indicating a 0.1 per cent growth in the three months leading to September. The subsequent months presented a mixed picture, with a 0.1 per cent contraction in October, followed by a 0.3 per cent rebound in November. This November recovery was largely attributed to a resurgence in manufacturing output, particularly at Jaguar Land Rover, which bounced back from a significant cyberattack that had previously disrupted operations.
Despite these gains, December is projected to have experienced stagnant growth, with estimates from Pantheon Macroeconomics pointing to no expansion for the month. Several industry surveys, including the construction Purchasing Managers' Index (PMI) data, highlighted ongoing weaknesses across housing, commercial construction, and civil engineering sectors, tempering overall optimism.
Expert Analysis on Budget Impact and Consumer Behaviour
Victoria Scholar, head of investment at Interactive Investor, provided insight into the potential drivers behind the economic uptick. "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 noted. "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."
Robert Wood, chief UK economist at Pantheon Macroeconomics, echoed this sentiment, suggesting that GDP growth "could tip to 0.2%" but maintaining his original prediction of 0.1 per cent. 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 and Bank of England Revisions
Nevertheless, the broader outlook for UK economic growth remains subdued and cautious. The Bank of England announced on Thursday that it now estimates the economy grew by 1.4 per cent last year, a slight reduction from its previous forecast of 1.5 per cent. The central bank has also revised down its growth projections for the coming years, adjusting the 2026 forecast from 1.2 per cent to 0.9 per cent, and the 2027 forecast from 1.6 per cent to 1.5 per cent.
These revisions underscore the ongoing challenges and uncertainties facing the UK economy, even as short-term indicators show signs of resilience and recovery. The upcoming ONS data will be crucial in assessing whether the modest growth predicted for Q4 2025 can be sustained and built upon in the months ahead, amidst a complex global economic landscape.
