Finance
UK economy barely grew in Q4 as budget uncertainty weighed
Published by Global Banking & Finance Review®
Posted on February 12, 2026
3 min readLast updated: February 12, 2026
Quick Summary
The UK economy grew by 0.1% in Q4 2025, falling short of the 0.2% forecast. December's growth was also 0.1%, according to the Office for National Statistics.
UK Economy Experiences Minimal Growth in Q4 Amid Budget Concerns
UK Economic Growth Overview
By Andy Bruce and William Schomberg
Impact of Budget Uncertainty
MANCHESTER, England Feb 12 (Reuters) - Britain's economy barely grew in the final quarter of 2025 as activity fared worse than initially estimated during the run-up to finance minister Rachel Reeves' budget, official figures showed on Thursday.
Business Investment Trends
Gross domestic product grew by 0.1% in the October-to-December period, the same slow pace as in the third quarter, the Office for National Statistics said.
Manufacturing and Services Performance
Economists polled by Reuters, as well as the Bank of England, had forecast 0.2% fourth-quarter growth compared with the previous three months.
The period was marked by rampant speculation about tax increases ahead of Reeves' budget on November 26. The ONS revised down monthly GDP data for the three months to November to show a 0.1% contraction rather than 0.1% growth.
Some more recent data have suggested that uncertainty has lifted for consumers and businesses.
"Looking at various surveys, there were some tentative signs that sentiment turned a corner and started to improve after the budget last year, which could help deliver a pick-up in activity this year," Luke Bartholomew, deputy chief economist at Aberdeen, said.
"However, recent political uncertainty may see that sentiment bounce reverse."
Prime Minister Keir Starmer has had to fight to keep his grip on Downing Street this week due to fallout from the Jeffrey Epstein scandal.
Thursday's figures underscored why investors think that the Bank of England is more likely than not to cut interest rates again in March.
The monthly GDP data showed a sharp downward revision to growth.
The data suggested hesitancy on the part of businesses during the fourth quarter as their investment fell by almost 3% - the biggest quarter-on-quarter drop since early 2021, driven largely by volatile transport investment.
Economist Thomas Pugh at tax and consultancy firm RSM said the overall weakness in business investment suggested budget uncertainty held back investment and spending.
Manufacturing was the biggest driver of the increase in output, despite the fact that car output was still recovering from September's cyber attack on Jaguar Land Rover, while the dominant services sector was flat. Construction output contracted by 2.1%.
In 2025 as a whole, Britain's economy grew by an annual average 1.3%, the Office for National Statistics said, compared with 0.9% in France, 0.7% in Italy and 0.4% in Germany.
British economic growth per head contracted by 0.1% for a second quarter, although it rose by 1.0% for 2025 as a whole.
In December alone, the economy grew by 0.1%, the ONS said, as expected in the Reuters poll. That left the size of the economy back at its level of June 2025.
(Reporting by Andy BruceEditing by William Schomberg)
Key Takeaways
- •UK economy grew by 0.1% in Q4 2025.
- •Growth was below the forecasted 0.2%.
- •December's growth also stood at 0.1%.
- •Data was reported by the Office for National Statistics.
- •Economists' expectations were slightly higher.
Frequently Asked Questions about UK economy barely grew in Q4 as budget uncertainty weighed
1What is economic growth?
Economic growth refers to an increase in the production of goods and services in an economy over time, typically measured by the rise in GDP.
2What is the Bank of England?
The Bank of England is the central bank of the United Kingdom, responsible for issuing currency, managing monetary policy, and ensuring financial stability.
