UK economy grows 0.1% in Q4 as services stall and investment weakens

The UK economy grew by 0.1% in the final three months of 2025, according to official data, as manufacturing offset a stalled services sector and a sharp construction decline.

Figures from the Office for National Statistics show growth in the fourth quarter matched the previous three months, missing expectations of a 0.2% rise.

A softer finish to the year

The ONS said output rose by 0.1% in December, cooling from 0.2% in November.

Surveys had suggested activity slowed in the run-up to the budget, as households held back spending and companies paused investment decisions amid expectations of tax changes.

Even so, the economy avoided contraction.

Over the full year, GDP expanded by 1.3% in 2025, improving on growth of 1.1% in 2024.

Economists had forecast stronger quarterly momentum, but the data point to a modest and uneven expansion across industries.

Services freeze, and the mix changes

The services sector, which makes up the majority of UK economic output, recorded no growth in the quarter. It was the first time in two years that services failed to expand.

There were areas of resilience. Travel agencies, tour operators, and administrative support services performed strongly.

However, professional, scientific, and technical activities declined by 1.1%, offsetting gains elsewhere.

The economy had started 2025 on firmer ground, with growth of 0.7% in the first quarter and 0.3% in the second quarter.

Momentum weakened later in the year, with output affected in the third quarter by a cyber-attack on Britain’s biggest carmaker, Jaguar Land Rover, which depressed vehicle production and contributed to the minimal 0.1% expansion in that period.

Factories lift output

Manufacturing provided the main boost in the fourth quarter, helping to counter flat services and weakness in construction.

The sector’s contribution was key in keeping overall GDP in positive territory at year's end.

Construction was the weakest major area of the economy. Output fell by 2.1% over the quarter, marking its worst performance in four years.

The decline reflected a reduction in repair and maintenance activity, alongside fewer new construction projects being started, highlighting softer demand conditions.

The latest figures underline how heavily the economy relied on factories as other parts of the economy struggled to gain traction.

Rates and forecasts

The Office for Budget Responsibility has forecast GDP growth of 1.5% in 2025 and 1.4% in 2026.

It expects the economy to grow at an annual pace of 1.5% up to 2030, partly because of low productivity growth.

Last week, policymakers at the Bank of England left interest rates unchanged at 3.75%.

They indicated that lower inflation, linked to cost-of-living measures in Reeves’s budget, could pave the way for rate cuts in the months ahead.

An ONS official described the broader trend as subdued growth, reflecting steady but limited expansion across the economy.